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Today's low-interest environment, and speculation that rates will rise in the near future, may make charitable lead trusts an ideal opportunity for your charitably-inclined clients.
The Hartford Foundation recently sat down with Morris Banks of Pullman & Comley, LLC, to learn more about how this powerful tool can be used by high net worth individuals to provide long-term estate tax benefits and leave a lasting legacy.
What is a charitable lead trust and how does it operate?
A charitable lead trust (CLT) is a vehicle in which a donor funds a trust that makes fixed payments to charity over a specified period of time. The designated charity receives the benefits in the early years, while the donor's heirs, or other non-charitable beneficiaries, receive the trust assets at the conclusion of the charitable term.
The beauty of the CLT is that the family gets a substantial share of the assets used to fund the trust when the charity's term ends, while the donor gets an unusually high income tax deduction in the year of the trust's creation.
What makes a CLT so attractive now?
Today, the combination of low interest rates, depressed asset values, and high Federal and Connecticut gift tax exemptions, make the use of a CLT ideal. When interest rates are as low as they currently are, the value of the gift a donor makes to family at the end of the charity's term is decreased because of the time value of money.
When coupled with the current $5 million Federal gift tax exemption, the ability to remove significant wealth from a donor's estate and pass it tax-free to heirs, while at the same time meeting their charitable goals, is very attractive. And, if appreciating assets are used to fund the trust, you can transfer growth to younger generation family members with no income, estate or gift tax consequences.
What makes a CLT so attractive now?
The client has to be charitably inclined, so advisors should have that conversation first. For those who are, CLTs make a lot of sense for individuals with gross estates of $5 million or $10 million or more. Those who have recently sold a business, or who have accumulated liquid assets, along with closely-held business owners, and who are interested in passing wealth to future generations on a discounted basis. Even high income earners who want the charitable deduction can benefit from a CLT. |
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Learn about two basic types of lead trusts - charitable lead annuity trusts and charitable lead unitrusts - at www.hfpg.org/givingadvice. |
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More Online
Read Morris' answers to these questions and more:
> What is the best piece of advice you have ever received (about anything)?
> What is the strangest asset you have ever handled in an estate or estate planning engagement?
> How, and when, do you raise the topic of charitable giving with your clients?
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Charitable lead annuity trusts can mean a tremendous benefit for charities, your clients and their families.
 For example, assuming a modest 3.5% growth rate, an initial gift of $1million 5% annual payout to charity over 15 years, and an AFR of 2.4%, your client can claim a charitable deduction of $623,645 in the year of the gift, the charity will receive $750,000 over the 15 year term, and your client or their loved ones will receive a remainder of $710,565.
Even with a 0% growth rate, the charitable lead annuity trust is still beneficial - with a $250,000 remainder for your clients or their loved ones at the end of the term.
To learn more about charitalbe lead trusts, contact Lori Rabb (860-548-1888 x1028 or lrabb@hfpg.org) or visit www.hfpg.org/givingadvice.
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Bus Tour Provides 'Hands On' Experience |
 On May 10th, advisors had the opportunity to see first-hand the operations of several area agencies that receive funding through the Hartford Foundation's Brighter Futures Initiative, a 30-year, $35 million effort begun in 1990 to help prepare Hartford children for school and support them in the early grades.
Participants gathered at Real Art Ways in Hartford, then boarded a bus to El Centro Family Center, Family Life Education/Parkville Family Center, and Literacy Volunteers of Greater Hartford.
On the tour, advisors learned about the Foundation's work in early childhood education and family support from Richard Sussman, director of the Brighter Futures Initiative. They also heard from the executive directors and staff at each site about the rich variety of programs and services offered by the organizations.
"The bus tour was terrific and it really showed in a 'hands on' way how the Foundation works and the support it provides to area nonprofits," said Jeffrey Winnick of Kahan, Kerensky & Capossela, LLP. "Seeing the facilities and meeting the personnel is the best way for the Foundation to make the Professional Advisory Committee aware of the impact of the Foundation's grants."
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Professional Advisory Committee
The Professional Advisory Committee at the Hartford Foundation includes professionals with deep and varied experience, including estate planning attorneys, CPAs, tax specialists, personal financial planners, life insurance professionals and real estate professionals. Established in 1993, the committee provides guidance to the Hartford Foundation on philanthropic strategies, communications efforts, and giving trends. During their four-year term, members learn in-depth about the Foundation and its work in the Greater Hartford region, and also advise on opportunities to engage individuals and families in the charitable community.
Pictured above:
Gathered at a recent Professional Advisory Committee are (l-r) Robert D. Levine, Lisa M. Gilmore, Kevin C. Leahy, Heather J. Rhoades, Edward G. Sullivan, Jeffery M. Winnick, Christopher S. Drew, Jeanmarie B. Shea, Eileen Foley Allgrove, Danielle P. Ferrucci, Stuart Magdefrau, John Wohler (Chair), Barbara J. Randolph, and Gary T. Wolff. New members in 2011 include: Christel Ford Berry, Ford Berry Associates Daniel Casper, U.S. Trust Bank of America Private Wealth Management / Benjamin Kille, Private Capital Group, LLC / Stuart Magdefrau, Magdefrau, Renner and Ciaffaglione, LLC / Louise Pisarski, PricewaterhouseCoopers LLP / Barbara Taylor, Reid & Riege, P.C.
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 Many of you have worked with Donna Roseman David over the nearly seven years that she was with the Hartford Foundation, as she focused on serving as a resource to the professional advisor community in Greater Hartford. Donna has moved on to a new professional opportunity with The Aegis Group at Morgan Stanley Smith Barney. We know you join us in wishing Donna success in her new position. |
The Hartford Foundation greatly values its relationships with area professional advisors, and we will continue serve as a resource to you and your clients. Please don't hesitate to contact us with any questions you have about charitable solutions and planning. We look forward to working with you.
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 10 Columbus Boulevard, 8th Floor · Hartford, CT 06106
860-548-1888 · www.hfpg.org Giving Advice is published periodically by Hartford Foundation for Public Giving, the community foundation for the 29-town Greater Hartford region. Hartford Foundation is devoted to building successful partnerships with professional advisers, donors and nonprofits to enhance the quality of life for people in the community. To access the Planned Giving Design Center, a free, comprehensive, online resource for professional advisors, visit www.hfpg.org/pgdc. |
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