Charitable Estate Planning
Charitable Lead Trust

[pemito's story]Individuals who wish to make substantial current contributions to support the performing arts while controlling the eventual distribution of their assets will want to consider the Charitable Lead Trust.

The Charitable Lead Trust comes in two versions, Unitrust and Annuity Trust, and has been used by philanthropists for years as a way of passing along large portions of their estates to heirs without significant erosion of assets due to gift and estate taxes.

How a Charitable Lead Trust Works:

  • You create a charitable lead unitrust or annuity trust and transfer assets to it.
  • The trustee invests the assets to provide a payout to the John F. Kennedy Center for the Performing Arts for a period of years. You decide how large the payout will be and for how long when you create the trust.
  • When the trust term ends, whatever remains in the lead trust passes to your heirs or, in rare cases, back to you.
Benefits Charitable Lead Trusts provide include:
  • Major gift support for the programs of the Kennedy Center and the National Symphony Orchestra.
  • A large gift/estate tax deduction for you, which may enable you to pass along far more to your heirs than would otherwise be possible.
  • Income taxes saved because the income diverted to the Kennedy Center is removed from your taxable income.
  • If you are having the trust assets come back to you when the trust ends, you are entitled to an income tax charitable deduction when the trust is established. However, you also have to report any taxable income the trust earns during the term of the trust, even the amount which goes to the Kennedy Center. Most people have the future distribution go to heirs rather than back to themselves.
  • The trustee is responsible for the management of the assets used to fund the trust. If you like managing investments yourself, you may wish to be the trustee of the charitable lead trust.
  • A possible solution to the problem of passing a family business, or an income producing building, along to the next generation.

Charitable Lead Trusts can be established during one's lifetime, or can take effect at one's death as part of the testamentary estate plan.

At each step of this process the Kennedy Center staff is available to speak with you and your advisors. We can provide you with sample documents, calculations showing tax advantages, suggestions as to what assets you might wish to consider using to fund a CLT, etc. We encourage you to seek advice of independent and objective legal and financial council.