How can charitable lead trusts grow benefits for your heirs?

Making contributions to your favorite charities is possible even after death. Some people anticipate disputes to arise out of potential complications this could bring to asset division. However, you can employ strategies to ensure your charitable intentions won’t jeopardize the financial security you want to provide for your heirs.

One estate planning tool you can use is a charitable lead trust (CLT). It’s an irrevocable split-interest trust that allows you to:

• Donate to charity for a set period during or after your lifetime
• Transfer the remaining funds to other beneficiaries, such as family members
• Receive significant tax benefits like income tax deductions and reduced gift and estate taxes
• Place various types of assets, including cash, real estate and publicly traded securities

In Florida, two types of CLT benefit noncharitable heirs. Consider each option’s advantages to determine which best suits your goals.

Charitable lead annuity trust

 

With a charitable lead annuity trust, you can:

• Pay a fixed dollar amount to the designated charity each year, regardless of the trust’s performance
• Offer potential benefits for non-charitable beneficiaries when the trust assets appreciate significantly since charitable payments don’t increase
• Mitigate the potential negative impact of low interest rates

Charitable lead unitrust

On the other hand, a charitable lead unitrust lets you:

• Pay a variable amount each year based on a fixed percentage of the trust’s value
• Receive annual trust re-evaluations
• Grow your charitable payments when your trust’s value increases
• Minimize assets subject to “generation-skipping transfer tax”

Navigating the complex process of choosing, creating and maintaining a CLT can be challenging. Consulting an experienced estate planning attorney is advisable to ensure that your trust aligns with your philanthropic values and can leave a lasting impact on the causes you support. They can also help you illustrate your plan’s benefits to your loved ones so they won’t feel left out.