Giving Smarter While Helping Your Estate
There is a way to avoid gift taxes in these trusts, a tactic called "zeroing out." This strategy — in which you structure the trust so the charitable payments made over time equal the amount of principal originally put into the trust — is generally only effective with charitable lead annuity trusts. By doing this, you avoid gift-tax consequences. But keep in mind that increasing payouts to charity could leave less money for heirs when the trust expires.
Charitable lead trusts can also be executed upon your death. But setting up one now allows you to strike when market conditions are ripe. "Your opportunity to take advantage of the depressed market value of assets and the historically low value of interest rates may have vanished by the time you die if a lead trust is created in your will," says Jeff Baskies, a partner at the law firm Katz Baskies LLC in Boca Raton, Fla.
Write to Mike Spector at email@example.com