In a Charitable Lead Trust, a donor places assets in an irrevocable trust that are transferred to the SAG Foundation annually (or at more frequent intervals) for a predetermined number of years or an individual’s lifetime. At the end of the trust’s term, the principal, which most likely has grown in value over the years, reverts to the donor (in a grantor lead trust) or, more commonly, is distributed to the donor’s beneficiaries (in a non-grantor lead trust) with little or no tax penalty. A Charitable Lead Trust offers a donor a means by which he/she can both lend substantial support to the SAG Foundation and provide an inheritance for heirs through deferred transfer of assets at reduced gift tax or estate tax rates.
The donor or the donor’s estate receives a gift tax deduction or estate tax deduction and/or may be liable for gift tax when the trust is established; these amounts are based upon the present value of the trust assets payable to the SAG Foundation. But, no gift or estate taxes will be due on the ultimate, increased value of the trust paid years later to the donor’s beneficiaries.
Income to the SAG Foundation can be a percentage of the value of the trust or a fixed amount. In a Charitable Lead Annuity, payments to the SAG Foundation are fixed when the trust is established. In a Charitable Lead Unitrust, the donor decides what percentage of the fair market value of the trust will be transferred to the SAG Foundation; payment amounts may vary as the fair market value of the trust is reevaluated annually.