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Charitable Lead Trusts
(Gift example*)
Example
Assume that you use appreciated property with an average cost basis of 50 percent to fund a $2 million Charitable Lead Annuity Trust (CLAT) that makes a 6.0 percent annuity payment ($120,000) to St. Jude Children's Research Hospital for 15 years, after which the trust principal reverts to your grandchildren in a generation skipping transfer. Assume also that your gross estate is currently $10 million, you have made no previous taxable transfers, you are in the 35 percent federal income tax bracket and the state income tax for trusts is 2.5 percent. Assume further that your average total investment return is 8.0 percent over the 15 year term. A 5.0 percent IRS Discount Rate is used to calculate the value of the remainder interest to your heirs.
CLAT |
Without Trust |
|
Gross principal |
$2,000,000 |
$2,000,000 |
Net principal placed in plan |
$2,000,000 |
$2,000,000 |
Benefit to family |
$2,000,000 |
$2,846,692 |
Benefit to St. Jude Children's Research Hospital |
$2,100,000 |
0 |
Total taxes |
$0 |
$2,339,561 |
PLEASE NOTE: This example is for illustrative purposes only and is not intended
as legal or tax advice. Consult your legal and tax advisors prior to making
any material decisions based on this data.
For more information
E-mail us, complete the personal illustration form or call us at (800) 395-1087 so that we can assist you through every step of the process.
