Charitable Lead Trusts
(Gift example*)
Example
Assume that you use appreciated property with an average
cost basis of 50% to fund a $2 million Charitable Lead Annuity Trust (CLAT) that makes a 6% annuity payment ($120,000) to the University of Connecticut Foundation for 20 years, after which the trust principal reverts to your grandchildren
in a generation skipping transfer. Assume also that your gross estate is currently $10 million, you have made no previous taxable transfers, you are in the 35% federal income tax bracket, and the state income tax for trusts
is 2.5%. Assume further that your average total investment return is 5% over the 20 year term. A 5.6 IRS Discount Rate is used to calculate the value of the remainder
interest to your heirs.
|
CLAT |
Without
Trust |
Gross
principal |
$2,000,000 |
$2,000,000 |
Net
principal placed in plan |
$2,000,000 |
$2,000,000 |
Benefit
to family |
$3,512,700 |
$2,752,867 |
Benefit
to the University of Connecticut Foundation |
$2,400,000 |
0 |
Total
taxes |
$317,779 |
$5,770,711 |
PLEASE NOTE: This example is for illustrative purposes only and is not intended
as legal or tax advice. Consult your legal and tax advisors prior to making
any material decisions based on this data.
For more information
Email
us, complete the personal illustration form,
or call us at 860.486.6135 so that we can assist
you through every step of the process.
Hal C. Reed, JD, CFRE
Assistant Vice President for Planned Giving
The University of Connecticut Foundation, Inc.
Storrs, CT 06269-3206
Telephone: 860.486.6135
Toll-free: 800.269.9965, Extension 6135
Facsimile: 860.486.1615
E-Mail: hreed@foundation.uconn.edu
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