Charitable lead trusts

Charitable lead trusts

A tax-efficient way to give to IU and your family

Are you looking for a way to support IU with annual gifts while reducing or even eliminating the taxes customarily due when you transfer your wealth to loved ones? A charitable lead trust (CLT) is a flexible way to meet these goals.

It works like this:

  1. You transfer cash or property into the trust. (Consider using marketable securities with strong growth potential to maximize the trust.)
  2. You name IU as the charitable income beneficiary.
  3. You select who will receive the remaining assets at the end of the trust term.
  4. The trustee manages the money and pays out annual gifts to IU for a set number of years or for your lifetime. Gifts can be a fixed dollar amount or a fixed percentage (meaning the annual amount changes based on the growth of the trust assets).
  5. At the end of the trust term, the trustee pays out the remaining assets to designated family members or other chosen beneficiaries.

See it in action

Jackie transfers stock with strong growth potential into a CLT. The trust makes annual payments to IU for the rest of Jackie’s life. When Jackie passes away, the remaining trust assets pass to her three grown children in equal parts. Since the value of the remainder interest was calculated at the time she created the trust, the children are not taxed on the stock’s significant appreciation over the many years it was held in the trust.

You choose how to give

  • Now or later? Establish a CLT immediately or create one in your will.
  • Fixed or variable payments? A charitable lead annuity trust pays out a fixed dollar amount to IU every year, while a charitable lead unitrust pays a fixed percentage of trust assets as revalued annually.
  • Designated for a specific purpose or unrestricted? Direct your gifts to the IU causes most meaningful to you (designated), or let IU use your support how it chooses (unrestricted).

A CLT helps minimize taxes

The remaining CLT assets expected to go to family members is calculated at the time you establish the trust. However, the assets may increase in value—sometimes significantly. If so, no tax is due on the appreciation, meaning you can pass more wealth to loved ones.

A CLT also provides a deduction for gift and estate tax purposes. However, it does not provide an income tax deduction—it’s primary purpose is to minimize or eliminate estate and gift transfer taxes, which can reduce the amount you can pass down to heirs.