Charitable Lead Trust

Protect Your Assets

If you want to make an impact now at a parish, school, or other entity and also provide for your family later, consider setting up a charitable lead trust. You transfer cash or other assets to a trust that makes payments to a parish, school, or other entity for a period of time. When the term is up, the remaining trust passes to your family or other beneficiaries you select.

There are two ways that charitable lead trusts make payments to a parish, school, or other entity:

A charitable lead annuity trust pays a fixed amount each year to a parish, school, or other entity and is more attractive when interest rates are low.

A charitable lead unitrust pays a variable amount each year to a parish, school, or other entity based on the value of the assets in the trust. With a unitrust, if the trust's assets go up in value, for example, the payments to a parish, school, or other entity go up as well.

An Example of How It Works

Father smiling with children George would like to support a parish, school, or other entity and receive tax benefits. George received a windfall amount of income and needs a large income tax deduction to offset the income. Following his advisor’s recommendation, George funds a grantor charitable lead annuity trust with assets valued at $1,000,000. George’s trust pays $60,000 (6% of the initial fair market value) to a parish, school, or other entity each year for 15 years, which will total $900,000. After that, the balance in the trust reverts back to George. He receives an income tax charitable deduction of $614,445. Assuming the trust earns an average 8% annual rate of return, George receives approximately $1,600,286 at the end of the trust term.

*Based on a 5.2% charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.

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Next Steps

Contact Jodi Halligan at 515-237-5044 or jhalligan@cfswia.org to talk about supporting a parish, school, or other entity by setting up a charitable lead trust.
Seek the advice of your financial or legal advisor.
If you include a parish, school, or other entity in your plans, please use our legal name and federal tax ID.

Legal name: Catholic Foundation of Southwest Iowa
Address: 601 Grand Avenue, Des Moines, IA 50309
Federal tax ID number: 45-5577090

Discover More

See which type of charitable trust best fits your estate plan with the FREE guide Trusts: Choose From Two Ways to Donate.