Charitable Lead Trusts Gain in Popularity

11:20 am Uncategorized

jackie kennedy e1312481962416 Charitable Lead Trusts Gain in PopularityA recent New York Times article noted that of all the things that Jacqueline Kennedy Onassis will be remembered for, one of the most unlikely is her will.  But it was her will – and the use of a savvy estate planning tool known as a charitable lead trust – that puts her in a special class of celebrities who got it right when it comes to estate planning.

Here’s how a charitable lead trust works:  the grantor places his or her estate into the trust for a specified time period and designates a charity as the first beneficiary and a non-charity (heirs) as the remainder beneficiary.  Payments are made from the trust to the charity each year during the specified time period.  After that time period elapses, the remainder of the trust passes to the grantor’s heirs with no estate taxes.

The IRS sets a hurdle rate for charitable lead trusts that are tied to U.S. Treasury rates.  When those rates are lower, it means payments to the charity can be lower.  If the trust assets are invested in a way that beats the hurdle rate (2.2 for this August) set by the IRS, then more can accumulate for heirs.

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