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The annuity version of a charitable lead trust

Charitable lead trusts are a handy way for wealthy individuals to give to their favorite cause while setting aside assets for their loved ones. One of the best features of a charitable lead trust is the substantial tax break it gives to the donor. For this reason, many very wealthy individuals look to the annuity type of these trusts for contribution and estate planning.

When an individual creates a charitable lead annuity trust, assets put into the trust begin to generate value. A charity of the donor's choosing receives an annual payment from the trust that continues for a certain number of years. After the trust expires, any leftover assets in it are distributed to the donor's designated beneficiaries. The funds given to beneficiaries are taxed as if they were donated to the charity. The benefit to the donor is that assets can be transferred to loved ones without being subject to federal gift or estate sales tax.

While the idea of a creating a trust that allows you to give more, save more, and spend less on taxes may seem ideal, charitable lead trusts are extremely complex and drafting one requires the help of an attorney.

Charitable lead trusts are irrevocable; once money is placed in it, it must be used as the trust spells out. Since it locks up funds for a set amount of time and is designed to pay out years of benefits, it usually represents a significant investment. Making the decision to create a charitable lead trust should be done with the knowledgeable advice of an attorney. With their help, the process of creating a complex charitable lead trust can easily be made to fit your needs.

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