Frequently Asked Questions
Q: Who is the income beneficiary?
A: Baltimore City Community College, for a period of years or for the life of a designated individual.
Q: Who receives the remainder?
A: After the term of payments ends, the trust remainder goes to designated non-charitable beneficiaries.
Q: How is the payout amount determined?
A: The payout amount is a fixed percent of the initial net fair market value of the trust.
Q: Will I receive an income tax deduction?
A: No; typically a charitable lead annuity trust does not provide an income tax deduction to the donor. However, presumably the donor’s income taxes will be reduced by virtue of the fact that a portion of the donor’s assets will be transferred to a trust.
Q: Will payments be taxed?
A: Annual income of the trust is tax-free to the extent it does not exceed the annual payment to the College. Excess income is typically taxed to the trust, not the donor.
Q: Are there any gift and estate tax consequences?
A: If you name your children as the remainder beneficiaries, you will have to report the value of the future distribution of the trust to them as a gift at the time the trust is established. To the extent that the gift to your children is greater than what the IRS assumed it would be, such excess will pass tax-free.
Q: What are some advantages a charitable lead trust?
A: There are several:
- Although you won’t receive an income tax deduction, you may reduce income taxes by removing a portion of your income generating assets to the trust.
- There is a potential for significant gift and estate tax savings
- The trust will ultimately be distributed to your children or grandchildren as an outright gift, giving them full control of the assets.
- Distributions will be made to the College during your lifetime so you will see the benefits of your gift.
The information on this page relating to Gift Planning is intended to provide general information that we hope will be helpful to you in your tax, estate, and charitable planning. It is not intended as legal advice and should not be relied upon as legal advice. Figures, calculations, and tax information are based on federal tax laws, regulations, rulings, and rates applicable at the time such information was prepared. Individual state laws may have an impact on the availability of gift annuities. For advice or assistance with your particular situation, you should consult an attorney or other professional adviser.