What if there was a way for you to transfer assets to your loved ones at a reduced tax cost? It is possible through a Charitable Lead Trust. You irrevocably transfer assets to a trustee chosen by you. You may decide to name Antioch University New England, for example, or you could name yourself as a trustee. During the trust term, which can be a fixed number of years, one or more persons’ lifetime, or a combination of the two, the trustee would invest the trust assets and pay a fixed percentage of the trust’s value (“the lead”) to Antioch University New England annually. The payments would be used by AUNE for whatever charitable purpose you designate. When the lead trust’s term ends, the trust assets would be distributed to your children, grandchildren, or other beneficiaries. Any asset appreciation that occurs within the trust during its term would be distributed to the beneficiaries, free from additional gift or estate taxes.
The donor receives estate and gift tax benefits, but does not receive a charitable income tax deduction for the present value of the stream of income that will pass to the charity. If the trust is established at your death, your estate will receive a charitable tax deduction for that value. However, the charitable lead trust and its activities are fully taxable. The trust pays taxes on its income and capital gains, although it may deduct amounts paid to the charitable beneficiary.