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Your path to this gift:
You're considering a gift in partnership with University of the Sciences in Philadelphia > Your planning objective is estate preservation > You want to reduce gift and estate taxes rather than income tax
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A lead trust holds appreciating assets, pays income to University of the Sciences in Philadelphia for a period of years, and then passes the remaining principal back to you – the version known as a grantor lead trust – or to beneficiaries you have selected – the non-grantor lead trust. The non-grantor lead trust offers you more significant tax benefits, and we will primarily focus on its features here.
The non-grantor lead trust reduces the cost of passing property to your heirs in two ways. First, the value, for estate and gift tax purposes, of the assets you place in your lead trust will be reduced by the present value of the income that the trust will pay USP. Second, the taxable value of the lead trust's assets is fixed at the time you establish the trust – any subsequent increase in the value of the assets will pass to your heirs outside your estate and thus free of estate or gift tax.
This combined reduction in the taxable value of the assets means that your family can often receive more from an estate plan containing a non-grantor lead trust than they could from an outright bequest from you.
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Who Should Be Trustee?
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A lead trust is a separate legal entity administered by a trustee.
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Either USPcan serve as trustee of your lead trust, or you or another person or institution can serve as trustee. We currently administer several charitable trusts and do not charge you a fee for our services. (We do ask a minimum gift of $50,000 to establish a lead trust for which we will serve as trustee.) Alternately, you may wish to follow your or your advisors' investment strategies.
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Whichever option you choose, we can share sample trust forms and discuss the details of establishing the lead trust with you and your advisors.
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The lead trust also offers you these additional features:
- It can be funded with shares in a growing family business, thus lowering the tax cost of passing ownership on to the next generation.
- The income earned by a non-grantor lead trust while it is in operation is not taxable to you.
- The trust can run for a term of years or for your lifetime.
- The lead trust is the only income-gift that delivers immediate benefits to USP.
- The longer the lead trust pays USP income, and the more income it pays us, the larger your estate and gift tax deduction will be.
How Do I Create a Charitable Lead Trust?
Setting up a charitable lead trust is not particularly difficult, but you should be advised by an attorney with expertise in the area of charitable trusts and estate planning. To save you time and expense, we can provide you with an initial draft of the lead trust agreement for review by you and your attorney. Once your trust agreement is signed, you can fund your lead trust by transferring assets to your trustee.
Email us, complete the personal illustration form, or call us at 888-857-6264 so that we can assist you through every step of the process.
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