Charitable Lead Trusts Offer You Options
You can benefit from the tax savings that result from supporting the New-York Historical Society without giving up the assets that you'd like your family to receive someday with a donation in the form of a charitable lead trust.
There are two ways that charitable lead trusts make payments to New-York Historical:
A charitable lead annuity trust pays a fixed amount each year to New-York Historical and is more attractive when interest rates are low.
A charitable lead unitrust pays a variable amount each year based on the value of the assets in the trust. With a unitrust, if the trust's assets go up in value, for example, the payments to New-York Historical go up as well.
An Example of How It Works
George would like to support New-York Historical and provide for his children. George received a windfall amount of income and needs a large income tax deduction to offset the income. Following his advisor's recommendation, George funds a grantor charitable lead annuity trust with assets valued at $1,000,000. George's trust pays $70,000 (7% of the initial fair market value) to New-York Historical each year for 15 years, which will total $1,050,000. After that, the balance in the trust reverts back to George. He receives an income tax charitable deduction of $955,700. Assuming the trust earns an average 6% annual rate of return, George receives approximately $767,240 at the end of the trust term.
*Based on a 1.2% charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.