Investing with Faith / Jim Maslar

Charitable Lead Trusts make a substantial difference you can see

When it comes to “big picture” charitable plans, there are many options for Catholics considering how to best share with others the resources God has given them.

But because each person’s goals are different and their situation unique, no single approach to what’s known as “planned giving”: giving incorporated into one’s annual, multi-year or lifetime/estate financial plans.

Planned giving can be a lot like farming. The land is prepared and tilled before seeding. And in many cases, those who do the planting leave a legacy of financial support but do not get to see the impact of their generosity.

That’s not the case, however, with a Charitable Lead Trust (CLT). In fact, with CLTs donors often arrange for the giving to happen during their life over a long period of time so they are able to see the fruits of their gifts to the organizations and causes they care about.

This is a major, though not only, way in which CLT’s stand out and differ from other vehicles of charitable planned giving.

What is a Charitable Lead Trust and how does it work?

A CLT is an irrevocable agreement that creates a stream of income for a charitable organization from a donor’s transfer of assets. Payments are made for a predetermined period of time, and at the end of the trust’s term the remainder of the assets are transferred back to the donor or to the donor’s heirs.

What are the benefits of a CLT?

• A CLT can reduce or even eliminate estate taxes that are due when your wealth passes on to your family members. Lower interest rates mean greater savings in both gift and estate taxes.

• When the applicable federal rate is low, the calculated value of the charity’s income interest is greater, and that generates a higher charitable deduction. The value of the calculated remainder passing on to heirs is lower, and this is the amount on which the transfer tax is based.

• When you establish the trust, you can take a sizable tax deduction that substantially reduces your taxable income. This is especially helpful for those who are looking for a way to offset a significant income event, such as the sale of a business or marketable securities.

• Creating a CLT during your lifetime reduces the size of your taxable estate when you die. And all appreciation in the value of your funded trust is completely free of gift and estate taxes, so you can pass more of your blessing on to the people you love.

You can set the payments to a qualified charitable organization as a fixed amount or as a percentage of trust assets. If you establish the CLT during your lifetime, you’ll be able to see your gift make a tangible difference in your community. The archdiocese’s Catholic Community Foundation welcomes such gifts designated for a specific purpose, but we are also grateful for unrestricted CLT gifts that allow us to direct support to our mission where it is most needed.

Who is a CLT for?

The quick answer is “not everyone.” A Charitable Lead Trust requires a substantial financial commitment over a long period of time. Individuals of significant means who are interested in maximizing both charitable giving and their family’s eventual inheritance in a tax-friendly way might explore CLTs. These trusts can allow donors to make an immediate impact with charitable giving while reducing the gift and estate taxes that are incurred when passing wealth on to heirs.

Learn more

If you are interested in learning more about Charitable Lead Trusts or how a CLT may help you meet your personal giving and financial goals, the staff of the Catholic Community Foundation is here to help you. Please contact us at ccf@archindy.org or 317-236-1482.
 

(Jim Maslar is a Catholic philanthropic advisor for the archdiocese’s Catholic Community Foundation. Tax or legal information provided herein is not intended as tax or legal advice. Always consult with your legal, tax or financial advisors before implementing any gift plan. To learn more about charitable gift annuities that support the mission of Christ in the Archdiocese of Indianapolis, e-mail ccf@archindy.org or call 317-236-1482.) †