Charitable Lead Trusts - Inspire Innovation - Carnegie Mellon University

Charitable Lead Trusts

What is a charitable lead trust?

Instead of paying the donor an income for life or a period of years, this trust pays the charity income for a number of years.  At the end of the trust's term, the principal reverts back to the donor or whomever the donor chooses.  Carnegie Mellon University requires a minimum gift of $1 million to establish a charitable lead trust.

Who would be interested in setting up a charitable lead trust?

Charitable lead trusts are mechanisms used by high net worth individuals who want to direct an annual income stream to their favorite charity, while using the trust as part of an overall estate planning tool to eventually pass assets to another generation.  Or, sometimes a charitable lead trust is used when a donor wants to accelerate a charitable deduction into the current tax year, with the assets ultimately returning to the donor's portfolio.

What kinds of charitable lead trusts are there?

There are many types of charitable lead trusts that may have multiple variables. Some charitable lead trusts are "qualified," whereby the donor is taxed on the annual income to charity.  Other lead trusts may be "nonqualified," which may entitle the trust to income tax deductions for payments made to charity.

"Grantor" lead trusts ultimately return the asset to the donor and may accelerate a charitable tax deduction in the year of the gift for the donor.  A "nongrantor" lead trust may eventually pass assets to other individuals, help avoid charitable contribution ceilings but may not generate a charitable tax deduction for the donor.

For more information please contact Christine Tebes and your financial advisor to determine if this charitable gift is right for your circumstances.