Charitable Lead Trust
If you are looking for a way to pass some of your assets to your family while reducing or eliminating gift or estate taxes, a charitable lead trust is an excellent option.
How it Works
- You contribute property to fund a trust that provides Portland State University with income for a number of years.
- You may receive a charitable deduction at the time of your gift.
- After a period of time, your family receives the trust assets plus any additional growth in value.
Zero Tax Plan
It may be possible to set up a lead trust that allows you to transfer assets to your family with no transfer taxes. The IRS assumes that a lead trust is only earning at the current low federal rate. If trust investments actually produce a higher return than the payments to PSU over the term of the trust, then the full value of the trust may be transferred to family with zero gift tax.
Family Limited Partnership/Lead Trust Plan
To discount your gift to family even more, you may consider first transferring your real estate or other assets into a family limited partnership which will fund your lead trust. The combination of the family limited partnership, the lead trust and a gift exemption can permit the lead trust to pay income to Portland State for a number of years and potentially transfer substantial assets tax free to your family.
Increasing Payment Lead Trust
With increased volatility in the stock market you may want to consider creating a lead trust that makes fixed payments of increasing amounts to Portland State over time. Because the payments to PSU are fixed, your family ultimately benefits from any growth in the trust. Low payouts in early years allow the trust to grow, providing potential protection should the economy produce below-average returns in the future.