Permanent Value

Week in Review 6/17/13

Bruce Doole
June 19th, 2013

Ohio National Financial Services defines a charitable lead trust as an agreement among a donor, a charity and a trustee (the charity can also serve as the trustee) that places a portion of the donor’s assets in trust. The charity then receives regular income payments during the term of the trust and after the trust term ends, the assets carry over to the donor’s designated beneficiaries.

Annual income to a charity is either made as a fixed percentage of the asset’s fair market value or a fixed dollar amount. When the trust is donated, the donor permanently determines the method of payment, length of the trust term, type of management, and ultimate beneficiaries. This trust can also be established by will.

Charitable lead trusts are usually funded by cash, securities, and/or real estate. If any income is earned beyond what was designated to the charity, it is added to the trust principle thus increasing the ultimate gift to the designated beneficiaries.

How a Charitable Lead Trust Works: A Breakdown

The charitable lead trust process can be broken down into a few main components. First, an asset is donated and in turn the donor receives a current income tax charitable deduction. Next, the charitable lead trust allocates the income of the donation to a charity while the remaining principal goes toward the beneficiaries of the trust.

Source:  Ohio National Financial Services