Charitable Lead Trusts
Leading with Philanthropy. With this type of gift planning arrangement, you place assets in a trust and payments are made to Bowdoin for a period of time before the funds are eventually returned to you (a grantor trust) or your heirs (a non-grantor trust).
During the term of the CLT, annual payments are made to the College (and possibly other charities) and then, at the end of the term of the trust, any remaining asssets in the trust come back to you (grantor CLT) and can be used to fund furrher philanthropy, or are paid to your heirs or other named beneficiaries (non- grantor CLT). Annual Payments to Bowdoin are paid out for a fixed number of years, or can continue for a life or multiple lives.
Tax-advantaged Wealth Transfer
The fundamental advantage of a CLT is that when you make transfers to it, you pay gift taxes on the projected amount of the ultimate transfer to heirs, not the actual amount. The projection is based on the assumption that the assets in a CLT will grow for the life of the trust at the IRS discount rate in effect at the time of the trust is established. Any growth that occurs above the IRS discount rate is an opportunity for tax-reduced or tax-free wealth transfer.
How it Works
- Transfer cash, securities, or other income-producing property to a charitable lead trust.
- Receive an available estate and/or gift tax deduction.
- During its term, the trust pays a fixed or variable amount to Bowdoin annually.
- At the end of the term, the trust's remainder returns to you or passes to your named heirs.
- Trust remainder passes to your heirs at reduced tax rates.
Compared to a Private Foundation or Donor-Advised Fund
A CLT may be a preferable way to accomplish your philanthropy — compared to establishing a private foundation or a donor-advised fund — as a CLT only deprives you of your capital on a temporary basis.
Calculate Your Benefits
Submit a few details and see how a CLT can help you.
Please note that we are prohibited from giving legal or financial advice and none of the information above should be interpreted as such. We encourage you to consult with your own legal counsel or financial advisor before deciding whether or not to proceed with a gift.