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A Charitable Lead Trust (CLT), is also funded by your gift of cash, stocks, bonds, real estate or other valuable asset. However, unlike a CRT, where you or another individual receive income annually, a CLT is used to create a yearly income stream for D.E.L.T.A. Rescue for a set number of years or until you die, at which time the funds remaining in the trust will be distributed to your designated beneficiaries (or to you if the trust has a fixed term).
There are two main types of CLT’s: one where the annual income is paid to the charity is a fixed amount, (Charitable Lead Annuity Trust); and one where the annual amount paid is a fixed percentage of the value of the assets placed in the trust (Charitable Lead Unitrust). The CLT can be used to create valuable income for D.E.L.T.A. Rescue, and provide gift and estate tax deductions for you and your heirs, thereby increasing your wealth during your life and increasing the wealth you can pass on to your loved ones during your life or when you die.
A CLT can also be a “Testementary” trust, which means that it can be funded after your death.
Getting back to Mr. Jones:
Mr. Jones, who is 60 years old, normally gives $10,000 per year to his favorite animal charities, including D.E.L.T.A. Rescue. He has two children. Mr. Jones funds a CLT with $150,000 in stocks and bonds, which are sold by the trustee and invested. The trust will pay D.E.LT.A. Rescue and the other charities $10,000 per year for 15 years. At the end of the term, the remainder will be paid to Mr. Jones with no additional tax. Mr. Jones obtains almost $100,000 income tax deductions when he creates the CLT. The deductions can be used in the year he funds the trust or over the next 5 years.
In the alternative, Mr. Jones can set up his trust so that the remainder is paid to his children after 15 years. No matter how much the remainder is in the trust, the gift tax due will only be about $22,000. If Mr. Jones had tried to transfer $150,000 directly to his children, he would have been charged as much as $71,000 in gift taxes.
For more information, e-mail: deltarescueoffice@earthlink.net or call 661-269-4010
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