In a charitable lead trust, a donor transfers property to the lead trust, which pays a percentage of the value of the trust assets, usually for a term of years, to the charity. At the end of the trust term, the remaining assets in the trust and any growth it has realized are passed to donor's heirs. Although there is no income tax deduction when the donor creates a charitable lead trust, his/her gift or estate tax is greatly discounted and any growth is passed to his/her heirs gift and estate tax free.
In a charitable lead unitrust, a donor irrevocably transfers cash, closely held securities or other valuable property to a trustee who, during the unitrusts term, invests the unitrust's assets. Each year, the trustee distributes a fixed percentage of the unitrust's net asset value, as calculated annually, to a named charity. These payments are made out of trust income (or trust principal if the trust income is not adequate) and are tax deductible as a charitable contribution for the year in which they are made. If, however, trust income exceeds the charitable payment for a given year, the trust pays income tax on the excess.
When the lead unitrust term ends, the unitrust distributes the remainder of its accumulated assets to a non-charitable remainderman, usually family members or other beneficiaries named by the donor. That amount is subject to federal gift tax based on the current fair market value of the gift at the time the trust is established. Gift tax is paid on the remainder interest as calculated from the current fair market value of the asset at the time the trust is established; generally this amount is much less than the estate tax would be on the asset as calculated at the time it is inherited.
The New Hampshire Charitable Lead Inter Vivos Unit rust (CLT) is a legal instrument that allows individuals to make charitable donations while still retaining certain benefits during their lifetime. It is a unique form of trust that combines elements of a charitable trust, an inter vivos trust, and a unit rust. The primary purpose of a Charitable Lead Inter Vivos Unit rust is to provide ongoing financial support to a charitable organization or cause chosen by the granter. The trust is established during the granter's lifetime and can be funded with a variety of assets, such as cash, real estate, stocks, or business interests. One of the key features of a New Hampshire Charitable Lead Inter Vivos Unit rust is that it allows the granter to receive a charitable income tax deduction for the present value of the charitable payments to be made during the trust term. This deduction can help reduce the granter's tax liability and provide additional incentive for making charitable contributions. There are different types of New Hampshire Charitable Lead Inter Vivos Unit rusts that can be established based on specific goals and preferences. Some common variations include: 1. Charitable Lead Annuity Trust (FLAT): In a FLAT, the charitable payments to the chosen organization are made as a fixed annual payment, which is predetermined at the time of establishing the trust. This allows the granter to provide a steady stream of income to the charity. 2. Charitable Lead Unit rust (CLUB): Unlike the FLAT, a CLUB provides charitable payments based on a fixed percentage of the trust's value annually. This means that the charity will receive variable amounts depending on the value of the trust assets. 3. Non-grantor Charitable Lead Unit rust (GLUT): This type of trust is particularly beneficial for individuals who do not need immediate income from the trust. In an GLUT, the granter is not entitled to any income from the trust during the trust term. Instead, the trust assets are invested to generate income for the chosen charity. By utilizing a New Hampshire Charitable Lead Inter Vivos Unit rust, individuals can support charitable causes they care about while enjoying the benefits of tax deductions and potential growth of trust assets. Additionally, this trust structure allows donors to leave a lasting impact by providing ongoing financial support to their chosen charitable organizations.
