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This type of gift arrangement allows you to direct current gifts to the Colorado State University Foundation for a specified period of time and, in turn, receive a reduction in gift or estate taxes on assets you wish to pass to heirs. This can be an excellent gift option if you own a valuable asset that you want to keep in the family, you expect will appreciate in value, and that currently produces income. There are two types of charitable lead trusts:
A charitable lead unitrust (CLUT) pays a variable amount each year based on the value of the assets in the trust. With a CLUT, the payout to the Colorado State University Foundation may fluctuate depending on the asset value in the trust. At the termination of the CLUT, like a charitable lead annuity trust, the return of principal to you or your heirs is allowed.
A charitable lead annuity trust pays a fixed amount each year to the Colorado State University Foundation and, at termination of the trust, allows the return of principal to you or your heirs.
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See which type of charitable trust best fits your estate plan with the FREE guide Trusts: Choose From Two Ways to Donate.
An Example of How It Works
George would like to support CSU and receive tax benefits. George received a windfall amount of income and needs a large income tax deduction to offset the income. Following his advisor’s recommendation, George funds a grantor charitable lead annuity trust with assets valued at $1,000,000. George’s trust pays $60,000 (6% of the initial fair market value) to CSU each year for 15 years, which will total $900,000. After that, the balance in the trust reverts back to George. He receives an income tax charitable deduction of $614,445. Assuming the trust earns an average 8% annual rate of return, George receives approximately $1,600,286 at the end of the trust term.
*Based on a 5.2% charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.
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