If you are looking for a way to transfer some of your assets to your family while reducing or eliminating gift or estate taxes, a charitable lead trust (CLT) is an excellent option. A CLT also allows you to make a significant gift to World Vision during the lifetime.
There are numerous types of Charitable Lead Trusts to choose from, depending on your goals. For instance, you can choose to pay fixed or variable income to World Vision and choose to whom the assets will go after the trust ends.
It is even possible to set up a lead trust that will allow you to transfer assets to your family with zero transfer taxes. The IRS assumes that a lead trust is only earning at the current low federal rate. If the actual investments of the trust produce a higher return than the payments made to World Vision over the term of the trust, then the full value of the trust may be transferred to family with zero gift tax.
To discount your gift to family even more, you may consider first transferring your real estate or other assets into a family limited partnership (FLP) which will fund your lead trust. The combination of the FLP, the lead trust and a gift exemption can permit the lead trust to pay income to us for a number of years and potentially transfer substantial assets tax-free to your family.
With increased volatility in the stock market you may also want to consider creating a lead trust that makes fixed payments of increasing amounts to World Vision over time. Because the payments to World Vision are fixed, your family ultimately benefits from any growth in the trust. Low payouts in early years allows the trust to grow, thus allowing protection should the economy produce below-average returns in the future.
If you have any questions about making a charitable lead trust, please click here to send us an email or call 1.800.426.5753.