Give an Income Stream

By: Laurie Valentine

Is your church in a capital campaign? Do you make recurring gifts each year to missions organizations, childcare ministries, your Baptist college alma mater or other charitable causes?

Would you be interested in making those gifts in a way that coordinates that giving over the next few years with a tax-saving way to transfer assets to your family?

If so, consider a charitable lead annuity trust (“CLAT”).

A CLAT is a legacy giving plan that pays a fixed income stream to one or more charitable causes for a designated period of years. At the end of the term of years the remainder of the CLAT can either be returned to you (“Grantor CLAT”) or be distributed to your children and/or other family members (“Non-Grantor CLAT”).

While creating a Non-Grantor CLAT does not entitle you to a charitable income tax deduction, it does provide a way to pass assets to your children or others at reduced gift and estate tax cost.

Gift tax savings come from the fact the tax value of the future gift to your family is the present value of the remainder interest in the trust, not the full value of what you place in the trust. With careful coordination of the fixed amount being paid to the charitable beneficiaries and the trust term you can reduce the present value of the remainder gift to family significantly.

Estate tax savings result from the removal of the asset, any subsequent appreciation and the future income it generates from your estate.

Leverage future asset transfers to family while providing recurring current gifts to charitable causes important to you by “giving an income stream” through a CLAT.

Laurie Valentine if Chief Operating Officer and Trust Counsel for the Kentucky Baptist Foundation. For more information, please call (502) 489-3533 or toll free in KY at 1(866) 489-3533.

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

Provide Support for Designated Time Period

By: Laurie Valentine-COO & Trust Counsel

Is your church in a capital campaign? Or, would you like to fund your annual giving for missions, childcare ministries or other charitable causes for the next few years in a new and creative way?

If you answered “yes” to either question and you want to coordinate your charitable giving with a tax-saving way to transfer assets to your family, a charitable lead annuity trust is a giving vehicle to consider.

A charitable lead annuity trust (“CLAT”) is a giving plan that provides a fixed income stream to one or more charitable causes for a designated period of years. At the end of the trust term the trust remainder can either be returned to you (this is a “grantor lead trust”) or be distributed to your children and/or other family members (a “non-grantor lead trust”).

While a gift to a “non-grantor” CLAT does not entitle you to a charitable income tax deduction, it does provide a way to pass assets to your children or others at reduced gift and estate tax cost. Gift tax savings come from the fact the tax value of the future gift to your family is the present value of the remainder interest in the trust, not the full value of what you place in the trust. With careful coordination of the fixed amount being paid to the charitable beneficiaries and the trust term you can reduce the present value of the remainder gift to family significantly. Estate tax savings result from the removal of the asset, any subsequent appreciation and the future income it generates from your estate.

Example: Sam and Betty Smith set up a 5-year 8% CLAT funded with $50,000 of stock. The $4,000 per year income stream (8% x $50,000 gifted to the trust) will be distributed to the Smiths’ church to fund their capital campaign pledge. Over the 5-year term their church will receive a total of $20,000. Assuming the trust assets earn an average annual return of 6.7%, there will be almost $44,000 left to pass to their children at the end of the 5 years and, if the gift tax value of the future gift to their children is only $31,150, $12,850 of that value passes tax-free to the children.

For more information, please call us at (502) 489-3533 or toll free in KY at 1(866) 489-3533.

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

“Fiscal Cliff” Charitable Giving Idea

By: Laurie Valentine-COO & Trust Counsel 

The federal gift tax and estate tax exemptions are $5.12 million for gifts made or deaths occurring in 2012. If Congress does not act, the federal estate tax and gift tax exemptions will both drop back to $1 million and the top transfer tax rate will increase to 55% on January 1, 2013.

As 2012 draws to a close, many are focused on how to use all, or a significant portion, of the current $5.12 million gift tax exemption, rather than miss the opportunity that could disappear if congress fails to act and we fall off the “fiscal cliff” (or it acts to reduce the current level of exemption).

If you would like to fund your annual giving for missions, childcare ministries or other charitable causes for the next few years in a new and creative way and coordinate your charitable giving with a plan that allows you use as much as possible of the 2012 federal gift tax exemption amount to make gifts to your family, a charitable lead annuity trust may be a good giving plan to consider.

A charitable lead annuity trust (“CLAT”) is a giving plan that provides a fixed income stream to one or more charitable causes for a designated period of years. At the end of the trust term the trust remainder can either be returned to you (this is a “grantor lead trust”) or be distributed to your children and/or other family members (a “non-grantor lead trust”).

While a lifetime gift to a “non-grantor” CLAT does not entitle you to a charitable income tax deduction, it does provide a way to pass assets to your children or family at a reduced gift and estate tax cost.

Gift tax savings come from the fact the tax value of the future gift to your family is the present value of the remainder trust interest, not the full value of what you give to the trust. Estate tax savings result from the removal of the asset, any subsequent appreciation and the future income it generates from your estate.

Ask your legal and tax advisers how you should be planning for the possibility of reduced estate and gift tax exemptions. A CLAT may be the answer.

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.