You can provide a future inheritance to children, grandchildren, or other heirs at reduced gift or estate tax rates through a charitable lead trust established now or through your will.

A charitable lead trust makes payments to the IRC for your life or a term of years, after which the principal is distributed to your heirs. You will receive a gift or estate tax deduction for a portion of the amount used to fund the trust. As a result of the gift or estate tax deduction, only a portion of the trust principal is considered a taxable transfer to your heirs. At the end of the trust term, your heirs will receive the entire trust principal, including any appreciation in trust assets during the trust term. You choose the percentage payout for your trust. Trust distributions to the IRC can be a fixed amount each year (charitable lead annuity trust) or your chosen percentage of the changing value each year (charitable lead unitrust).

Example: Donate $500,000 to a 7% charitable lead annuity trust that will make payments of $35,000 a year to the IRC for 15 years, after which the principal will go to your children. You receive a gift tax deduction of approximately $343,245, meaning that only $156,755 of the $500,000 is deemed to be a taxable gift to your children. The charitable lead trust saves gift taxes, even though your children should receive the full $500,000 (and possibly even more) at the end of the trust term.

To request a personal conversation about planning a lead trust, please e-mail plannedgiving@theIRC.org or contact Nora Benoliel, Senior National Officer for Gift Planning at Nora.Benoliel@theIRC.org or (212) 551-3147.