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Charitable Lead Trusts Offer You Options

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You can benefit from the tax savings that result from supporting the University of Tennessee Institute of Agriculture without giving up the assets that you'd like your family to receive someday with a donation in the form of a charitable lead trust.

There are two ways that charitable lead trusts make payments to UTIA:

A charitable lead annuity trust pays a fixed amount each year to UTIA and is more attractive when interest rates are low.

A charitable lead unitrust pays a variable amount each year based on the value of the assets in the trust. With a unitrust, if the trust's assets go up in value, for example, the payments to UTIA go up as well.

An Example of How It Works

Man smiling George would like to support UTIA and provide for his children. Following his advisor's recommendation, George funds a charitable lead annuity trust with assets valued at $2,500,000.

George's trust pays $175,000 (7 percent of the initial fair market value) to UTIA each year for 15 years, which will total $2,625,000. After that, the balance in the trust goes to his children. Assuming a 6 percent investment return, the children will receive approximately $1,918,101.

His gift tax deduction is $2,182,775* against the $2,500,000 of assets. Therefore, only the difference ($317,225) is subject to gift tax, which is offset against his lifetime gift tax exclusion. After that, the remaining trust assets and all of their growth will pass to his family at zero additional cost in gift and estate taxes. Had George given the $2,500,000 outright to his children, it would have been a taxable gift.

*Assuming annual payments and a 2.4 percent charitable midterm federal rate.

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Next Steps

  1. Contact Angelia M. Nystrom, JD, LLM at 865-974-7423 or anystrom@tennessee.edu to talk about supporting UTIA by setting up a charitable lead trust.
  2. Seek the advice of your financial or legal advisor.
  3. If you include UTIA in your plans, please use our legal name and federal tax ID.

Legal Name: University of Tennessee Foundation, Inc.
Address: 1525 University Avenue, Knoxville, TN 37921
Federal Tax ID Number: 62-1844686