A Highly Practical Discussion of Lead Trusts Chicago Council on Planned Giving Annual Symposium Tim Prosser and Paul Williamson CLT

Transcription

1 A Highly Practical Discussion of Lead Trusts Chicago Council on Planned Giving Annual Symposium 2017 Tim Prosser and Paul Williamson CLT 1

2 Charitable Lead Trust Transfer property Remainder Donor 1 3 Lead annuity trust Remainderman 2 Fixed payments to charity Charity 2 A Short Quiz What is the ratio of charitable remainder unitrusts to charitable lead trusts? 100 CRTs for every 1 CLT 50 CRTs for every 1 CLT 25 CRTs for every 1 CLT 15 CRTs for every 1 CLT 5 CRTs for every 1 CLT Source: Tax Statistics of the Internal Revenue Services ( 3

3 Charitable Lead Trusts Charitable Remainder Unitrust 6,498 91,250 Average $3.6M $23.7B Average $1M Source: Tax Statistics of the Internal Revenue Services ( 4 Benefits to the Donor Give assets to heirs and pay little or no gift tax Provide an immediate income stream to charity Accelerate your deduction for the income stream

4 Benefits to the Charity Don t have to wait for the money Bigger gifts than from CRTs CLTs can help further build the relationship 6 Two Types of Charitable Lead Trusts Non-Grantor CLT Grantor CLT 7

5 8 Non-Grantor CLAT Transfer property Remainder Donor 1 3 Lead annuity trust Family 2 Fixed payments to charity Charity 9

6 Long-Term Return Assumption: CFMR vs. Growth 9.0% 7.7% 6.8% IRS Longterm average 2.4% Longterm average IRS CFMR at 1/1/1996 Long-Term Return Assumption for Growth as of 1/1/1996 CFMR at 1/1/2017 Long-Term Return Assumption for Growth as of 1/1/ year Actual Returns vs. Long-term Average Growth of $100 using actual and estimated returns. Growth Actual uses actual returns for the K&Co. Growth composite from 1/1/96 to 12/31/15. K&Co. composite returns are net of mutual fund expense ratios and K&Co. investment advisory fees. Composite returns for other time periods are available on request. Growth Estimated uses the 9.0% estimate total return from the 1996 Strategic Asset Allocations sheet. See the Disclosure section for more information. 11

7 Talking to Donors About Non-Grantor CLTs Give assets to heirs and pay little or no gift tax 12 Talking to Donors About Non-Grantor CLTs Transfer tax benefits are greatest when interest rates are low 13

8 Talking to Donors About Non-Grantor CLTs Put your gift to work during your life 14 Talking to Donors About Non-Grantor CLTs Create the trust during life or through your estate plan 15

9 Talking to Donors About Non-Grantor CLTs Unlike with other charitable gifts you make, highly appreciated assets should not be used 16 Talking to Donors About Non-Grantor CLTs There is flexibility around who can serve as trustee 17

10 Talking to Donors About Non-Grantor CLTs Remove income from your personal tax return 18 Talking to Donors About Non-Grantor CLTs The trust pays tax only on income that exceeds the distributions made to charity 19

11 20 Grantor CLAT Transfer property Remainder 1 Donor 3 Lead annuity trust Donor pays income tax 2 Donor Fixed payments to charity Charity 21

12 Talking to Donors About Grantor CLTs Make a gift to charity, take an income tax deduction, and maybe get your money back 22 Talking to Donors About Grantor CLTs Tax benefits are greatest when interest rates are low 23

13 Talking to Donors About Grantor CLTs Put your gift to work during your life 24 Talking to Donors About Grantor CLTs You will pay tax on the income earned by the trust 25

14 Talking to Donors About Grantor CLTs Unlike with other charitable gifts you make, highly appreciated assets should not be used 26 Talking to Donors About Grantor CLTs There is flexibility around who can serve as trustee 27

15 Talking to Donors About Grantor CLTs You can reserve the right to direct the charitable distributions 28 Talking to Donors About Grantor CLTs Wealth screening Donors with high affinity for your institution Build relationships with local advisors 29

16 How Do You Reach Them? Highly-targeted personal letter Give talking points to senior staff Equip advisors with materials 30 CLT 31

17 203 Redwood Shores Parkway, Suite 300, Redwood Shores, CA Phone: (650) One Metropolitan Square, 211 North Broadway, Suite 1000, St. Louis, MO Phone: (314) Franklin Street, 7th Floor, Boston, MA Phone: (617) and prior years by Kaspick & Company, LLC, a registered advisor and provider of advisory services. This presentation may not be reproduced, distributed, or transmitted in any form, in whole or in portion, by any means, without written permission from Kaspick & Company, LLC.