CHARITABLE LEAD TRUSTS
A Charitable Lead Trust (CLT) is an irrevocable trust designed to reduce tax liability upon inherence.
Here’s how it works in a nutshell:
You set up the CLT, and then donate payments from the trust to a charity for a set amount of time. After this time period expires, a beneficiary gets the balance of the trust. This reduces taxes the beneficiary owes for inheritance, and gives them additional tax benefits, such as income tax deductions for charitable donations, and savings on estate and gift taxes. CLTs also set up a continuous way for beneficiaries and benefactors to make further charitable contributions without manually issuing monthly payments. CLTs are generally set up during the estate-planning process of estate planning, when a will, or when benefactors want to reduce the burdens their beneficiaries will incur upon receiving their inheritance.
REAL LIFE EXAMPLE
Mary (not her real name) held mineral rights in Texas, and for years, she thought nothing of them. Then fracking came along, and suddenly she was a multi-millionaire in her late 90s. Capstone Legacy Foundation helped her place money from her mineral rights in a lead trust to reap significant tax-free funds at a future date.
Her lead trust is the largest owner of her land with the mineral rights. Annual grants from her trust finance a college in Arizona, food banks in California, and a charity for international fellowship for Christians and Jews.
She also set up remainder trusts for each of her three children. Each of her children’s charitable remainder trusts get about $15,000 per month from oil. When Mary passed away, her bank tried to secure details for the CLT to take it over from the family.
Capstone fought the banks and secured Mary’s donor intent by threatening to remove the banks from the account. The bankers suddenly became friendly to keep the account and avoid a lawsuit. This is an example of how Capstone secures tax free money for donors and secures their intent after death.