Charitable Lead Trust

Protect Your Assets

If you want to make an impact now at the Deltaville Maritime Museum and also provide for your family later, consider setting up a charitable lead trust. You transfer cash or other assets to a trust that makes payments to the Deltaville Maritime Museum for a period of time. When the term is up, the remaining trust passes to your family or other beneficiaries you select.

There are two ways that charitable lead trusts make payments to the Museum:

A charitable lead annuity trust pays a fixed amount each year to the Museum and is more attractive when interest rates are low.

A charitable lead unitrust pays a variable amount each year to the Museum based on the value of the assets in the trust. With a unitrust, if the trust’s assets go up in value, for example, the payments to the Museum go up as well.

An Example of How It Works

George would like to support the Museum and receive tax benefits. George received a windfall amount of income and needs a large income tax deduction to offset the income. Following his advisor’s recommendation, George funds a grantor charitable lead annuity trust with assets valued at $1,000,000. George’s trust pays $60,000 (6% of the initial fair market value) to the Museum each year for 15 years, which will total $900,000. After that, the balance in the trust reverts back to George. He receives an income tax charitable deduction of $614,445. Assuming the trust earns an average 8% annual rate of return, George receives approximately $1,600,286 at the end of the trust term.

*Based on a 5.2% charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.