Charitable lead trust example

A charitable lead trust is a way to make a gift to George Fox University over a period of years, and at the end of the trust term, distribute the remaining funds or the gift assets to your heirs with significant savings on estate and gift taxes.

Edna wants to provide support for the Chamber Singers of the George Fox Performing Arts Department. Edna funds a lead trust with $500,000 and stipulates that the Chamber Singers are to receive $40,000 per year for 15 years, after which the remaining principal will be distributed to her two children. She will report a taxable gift of only $61,420. The difference ($500,000 - 61,420 = $438,580) is a charitable gift tax deduction. If she had simply given $500,000 to her children, the entire amount would have to be reported to the IRS and may lead to the imposition of a gift tax.

*Note - for gift tax purposes, there is an annual exclusion amount of $12,000, and a lifetime exclusion amount of $1,000,000.