Charitable Lead Trusts
Charitable lead trusts are just the opposite of the majority of other life income gifts offered by Quinnipiac University. Rather than pay the donor or other individual an income for life or a term of years, with the principal passing to Quinnipiac, the charitable lead trust pays income to Quinnipiac for a term of years or the life of the donor and then the principal either returns to the donor or passes to one or more heirs.
The grantor charitable lead trust provides income to Quinnipiac for a term of years and then returns the principal to the donor. This arrangement generates an income tax charitable deduction equal to the present value of the income stream coming to Quinnipiac over the term of the trust. This could be an attractive method of paying a multi-year pledge for some donors. It should noted, however, that this charitable trust is not tax-exempt. It is especially important that the investment of trust assets be managed carefully. Also, any income recognized by the trust in excess of the amount paid to Quinnipiac is taxable to the donor; another reason for careful management.
The non-grantor charitable lead trust provided income to Quinnipiac and then returns the principal to someone other than the donor; typically an heir. This version of the lead trust can be an effective way of passing on assets to a child at significantly reduced gift or estate taxes. At the time the trust is established, the donor will be deemed to have made a taxable gift to the heir who will ultimately receive the trust assets. The trust will generate a gift tax charitable deduction equal to the present value of Quinnipiac’s interest in the trust – the income stream. The deduction amount is based on the payout rate of the trust, as well as the term of the trust. By adjusting the payout rate and term of the trust, the donor can effectively determine how much gift tax, if any, he or she wants to be liable for. At the end of the term of the trust, the assets pass to the named beneficiary completely free of any additional gift or estate tax, no matter how much the value of the assets in the trust have grown. Again, as with the grantor lead trust above, the non-grantor trust is not tax-exempt so careful management is required.
Quinnipiac is not prepared to serve as the trustee of charitable lead trusts at this time; however, we would be happy to work with you and/or your advisers to assist you in the process.
For more information, please contact Steve Greaves, director of gift planning, at 203-582-3995, toll-free at 877-582-1929 or by e-mail at firstname.lastname@example.org.
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