Charitable Lead Trust
Protect Your Assets
If you want to make an impact now at Oregon Health & Science University Foundation or Doernbecher Children's Hospital 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 Oregon Health & Science University Foundation or Doernbecher Children's Hospital 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 OHSU or Doernbecher:
A charitable lead annuity trust pays a fixed amount each year to OHSU or Doernbecher and is more attractive when interest rates are low.
A charitable lead unitrust pays a variable amount each year to OHSU or Doernbecher 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 OHSU or Doernbecher go up as well.
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George received a windfall amount of income this year and is concerned about how the tax on the extra income will impact his family. He asks his financial advisor, who recommends funding a grantor charitable lead annuity trust. This provides a large income tax deduction to offset the income, allowing George to support his family as well as OHSU and Doernbecher. With assets valued at $1,000,000, George's trust pays $70,000 (7% of the initial fair market value) to OHSU and Doernbecher each year for 15 years, which will total $1,050,000. After that, the balance in the trust reverts back to George. He receives an income tax charitable deduction of $955,700. Assuming the trust earns an average 6% annual rate of return, George receives approximately $767,240 at the end of the trust term.
*Assuming annual payments and a 1.2% charitable midterm federal rate.
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