If you have a very large estate ($11.2 million or more for an individual, or $22.2 million for a married couple), your heirs will be obliged to pay federal estate taxes. A Charitable Lead Trust is a way of minimizing estate taxes while providing a significant charitable gift for The Cedars and other charities.
A Charitable Lead Trust does not help you pay less in income taxes. It is designed for two main purposes: to make significant charitable gifts and to minimize estate taxes. If you do not have a very large estate, as described above, a Charitable Lead Trust does not make sense for you.
If you do have a very large estate and would like to minimize paying estate taxes, you should speak with your legal and financial advisors to see if a Charitable Lead Trust makes sense for you and your family.
How the Charitable Lead Trust would work is as follows:
- You would transfer assets into the Charitable Lead Trust.
- Every year, the Charitable Lead Trust would distribute either a fixed percentage or a fixed dollar amount to The Cedars and other charities. These charities can be predetermined at the time the Charitable Lead Trust is established, or you or your family can name the charitable beneficiaries each year.
- After a certain number of years (usually 20 years or longer), the assets in the Charitable Lead Trust are transferred to a later generation of your family. If the Charitable Lead Trust is structured properly, those assets pass to your heirs with either no or very little federal estate taxes.
- The Cedars would not serve as a trustee of a Charitable Lead Trust.
Charitable Lead Trusts are very complex instruments requiring sophisticated knowledge of the interrelationship of tax law, investments, business, and charity. Constructing and managing these instruments requires significant and high-level professional advisors. Charitable Lead Trusts are not for everyone. But those in this category of considerable wealth should be aware of Charitable Lead Trusts and how they work, and they should consider whether Charitable Lead Trusts should be a part of their estate planning.