The charitable lead annuity trust can allow you to support Colby with some of your assets and either have those assets pass to heirs or retrieve them yourself at the end of a specific term of years. This vehicle functions in the opposite way that a charitable remainder trust functions. A charitable lead annuity trust provides the College with current income; then, at the termination of the trust, the trust assets pass to the identified heirs or back to you. Tax consequences depend on whom the assets will pass to at the end of the trust term.

The non-grantor charitable lead annuity trust is the most common form of charitable lead annuity trust. This trust pays Colby a specified amount each year (expressed as a percentage of the original gift amount) for a specified number of years, after which the assets pass to heirs you have identified. At the time the gift is established, you would be deemed to have made a taxable gift to your heirs, but this trust generates a gift and/or estate tax deduction. The size of the deduction can be largely controlled by balancing the term of the trust with the trust payout rate. In many cases it is possible to generate a deduction large enough to offset the gift or estate tax that otherwise would have been payable. At the end of the specified term, the assets remaining in the trust pass to the heirs you identified free of any gift or estate tax, regardless of the value of those assets at the time.

The grantor charitable lead annuity trust differs from the non-grantor version in that, at the end of the trust term the assets would revert to the donor. In this version, an income tax charitable deduction is generated. However, the donor is required to recognize all payments made to Colby as income for tax purposes each year of the term of the trust.

It is important to note that, unlike charitable remainder trusts, charitable lead annuity trusts are taxable. Therefore it is important to secure the services of an experienced and knowledgeable trustee. Although Colby cannot serve in this capacity, we will work with you to design the trust and will assist you in finding a competent trustee.