A charitable lead trust is an excellent way to transfer substantial assets to your children or others at greatly reduced gift and estate tax rates and make a significant gift to the benefit of the Sierra Nevada.
- Providing Income to The Sierra Fund Now
When you establish a charitable lead trust, The Sierra Fund will receive income now for a period of years or for your lifetime — income that we can use to carry out our work.
- Income, Estate, or Gift Tax Benefits
The type of trust determines the tax benefits: A Non-Grantor Charitable Lead Trust allows you to transfer assets to your family or others at greatly reduced gift and estate taxes. A Grantor Charitable Lead Trust allows you to retain ultimate possession of an asset. This trust provides an income tax charitable deduction in the year that the trust is created.
How It Works
- A Non-Grantor Charitable Lead Trust
You transfer assets to a trustee of your choice. At the time you create the trust, its assets are removed from your taxable estate. During the term of the trust, usually a fixed number of years, the trustee invests the trust assets. Each year, the trustee distributes a payment, usually a fixed dollar amount (annuity trust), to The Sierra Fund. These payments are made out of trust income, or trust principal if the trust income is not adequate. If trust income for a given year exceeds the annual charitable payment, the trust pays income tax on the excess.When the non-grantor lead trust term ends, its charitable payment stops and the trust distributes its accumulated assets to family members or other beneficiaries named by you.These assets are transferred to your heirs and beneficiaries at greatly reduced gift and estate tax costs as any appreciation during the trust term is free of additional gift and estate tax. These taxes are assessed at the time of the trust creation and are further reduced by the value of the income to The Sierra Fund.
- A Grantor Charitable Lead Trust
You irrevocably transfer assets, usually cash or securities, to a trustee of your choice. During the term of the trust, usually a fixed number of years, the trustee invests the trust assets. Each year, the trustee distributes a fixed payment (annuity trust) or a fixed percentage of the trust’s value, as revalued annually (unitrust), to The Sierra Fund. These payments are made out of the trust income, or trust principal if the trust income is not adequate.When the grantor lead trust term ends, its charitable payments stop and the trust returns all of its accumulated assets back to you.Because you retain ultimate possession of a grantor lead trust’s assets, all taxable income earned by the trust during its term, including income distributed to The Sierra Fund, is taxable to you. For this reason, grantor lead trusts sometimes are invested to earn tax-free income.
Making Your Gift
For more information on charitable lead trusts or other gifts that provide income or tax benefits, please fill out our online form, e-mail firstname.lastname@example.org, or call us at (530) 265-8454.