Passing Assets to Heirs

Charitable Lead Trust

If you wish to combine a gift to Vassar with a gift of assets to your children, grandchildren or other heirs, you may want to consider establishing a charitable lead trust. A Lead Trust offers some significant tax advantages, including the ability to reduce transfer taxes thus passing more of your assets on to heirs.

You may be familiar with Income-producing gifts (such as gift annuities, pooled income funds and charitable remainder trusts). Though they vary in certain respects, they all share two points. They provide:

1. an income stream currently to the donor (or another person) and
2. the remainder to charity.

A charitable lead trust is essentially the opposite of an "income-producing gift." It provides:

1. an income stream currently to charity and
2. the remainder to the donor (or another person).

EXAMPLE

Donor creates a 20-year 5% charitable lead annuity trust with $1,000,000 gift of cash, naming Vassar as the income beneficiary and children as remainder beneficiaries.

Annual Income paid to Vassar	$50,000
Gift/Estate Tax Deduction **	$634,700
Total Income To Vassar over 20 years *	$1,000,000
Estimated Principal to Children After 20 years *	$2,732,859

Minimum gift amount at Vassar is $1,000,000.

*

Assumes 3% income and 5% growth for an 8% long-term average rate of return. The trust term is 20 years.

**

Deduction based on IRS discount rate that varies slightly month to month.

With a lead trust, you transfer assets to the trust, which can be invested and managed by Vassar or another trustee. The trustee pays an annual sum to Vassar (and/or another charitable institution) for a specific term of years, usually 10-25. When the trust terminates, the principal remaining plus any appreciation is transferred to your named beneficiaries, typically children or grandchildren. One of the benefits of such an arrangement is that you receive a federal estate tax deduction equal to the estimated value of the annual trust payments to Vassar. Moreover, any appreciation in the assets transferred to the trust during the term of years is not subject to additional estate tax. As a result, you are often able to pass on to your heirs a larger estate after tax than would otherwise be possible.

Lead Trusts managed by Vassar can be established with a minimum gift of $1,000,000. (However lead trusts are very often managed by a trustee other than the charity named as income beneficiary).

As you can imagine, these arrangements are particularly complex and require the careful review and consultation of your own advisors. To request a personal gift illustration from the gift planning staff, please Alexas Orcutt with the Gift Planning Office at (845) 437-5487 or (800) 443-8196 or use our information request form. If you'd prefer to run a sample gift calculation yourself, please use the planned gift calculator.