A charitable lead trust is a way to make a gift to Foxcroft Academy and to transfer assets to heirs at a reduced gift tax cost. The concept is simple: you transfer cash, securities or other property to a trust to last a set number of years and designate the Trustees of Foxcroft Academy as the income beneficiary; later the trust property reverts to your heirs, either outright or in trust. A charitable lead trust can be used to greatly reduce or completely eliminate the gift tax cost of transferring wealth to children or grandchildren. In addition, any future appreciation on the property can be channeled to heirs without incurring further gift or estate tax liability. Given the size of gift and estate taxes, the savings that can be achieved through use of a charitable lead trust can be especially significant.
A testamentary lead trust provides an estate tax deduction based upon the present value of the charity’s income interest. The estate tax payable is based solely on the present value of the heirs’ remainder interest. By reducing the value of the heirs’ remainder interest, a donor can reduce the amount of estate tax that would otherwise be due. The term of the trust and the amount of the payout can be calculated in such a way as to reduce or eliminate estate tax and take maximum advantage of a donor’s unified credit (currently $650,000). Charitable lead trusts are more appropriate for donors who are facing a large estate tax. Although the minimum needed to establish a charitable lead trust with the Trustees of Foxcroft Academy as trustee is $100,000, such a trust generally is established and works best when funded with amounts larger than this.