Texas Heritage, Volume 18, Number 3, Summer 2000 Page: 6
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This is the second in a series of articles about
charitable gift giving.The first article in the
Spring 2000 issue of HERITAGE was about
the Charitable Remainder Trust.
BY W. SCOTT RYBURN
The Charitable Lead Trust is the reverse
of the Charitable Remainder Trust. Essentially,
the donor transfers property to the
trust, which pays a percentage of the value
of the trust assets to the Charity for a term
of years or for the life or lives of an individual
or individuals. At the end of the
trust term, the remaining trust property is
either returned to the original donor or to
other noncharitable beneficiaries named by
the donor. A CLT is practical only in situations
where the donor or his or her family
can afford to forego the income produced
by the property over the charitable lead
term. The Charitable Lead Trust is an excellent
way to transfer assets with appre
If e es~as ^6egacp
ciation potential to the owner's children
at a substantially reduced gift or estate tax
For example: Mr. Donor creates a CLT
and funds it with income-producing real
property valued at $250,000 at the creation
of the trust and directs that the trust is to
pay the Charity eight percent or $20,000
annually for 15 years. At the termination
of the 15-year term, the trust assets are to
be distributed to Mr. Donor's children. The
Library's income interest in the trust is valued
at $161,215 and the children's remainder
interest is valued at $88,785 (or
$250,000 less the $161,215, and the.
children's remainder interest is valued at
$88,785 (or $250,000 less the $161,215).
Thus, Mr. Donor is able to transfer the
property valued currently at $250,000 to
his children with gift or estate taxes applied
to the lower value of $88,785, rather
Even if at the end of the "~n~
15-year term the value of the
assets has appreciated to
$400,000, there is no additional
gift tax upon the
transfer of the assets to
the children. Had
Mr. Donor continued
to hold the
property until his
death, the property would
have been included in his estate at the
$400,000 value and potentially subject to
substantial estate taxes.
So, if an individual is interested in making
a gift of money or property to a favorite
charity or nonprofit organization, there
are many different ways to structure the
gift to provide income and estate tax benefits
to the donor and his or her family.
The very best advice is to consult a legal
and tax advisor to determine which of the
techniques is best suited to accomplish
W. Scott Ryburn is a board certified estate
planning attorney who lives in Midland.
HERITAGE * 6 * SUMMER 2000
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Texas Historical Foundation. Texas Heritage, Volume 18, Number 3, Summer 2000, periodical, Summer 2000; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth45389/m1/6/: accessed July 22, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting Texas Historical Foundation.