Lead trusts allow you to combine a charitable gift with a transfer of wealth to your heirs, resulting in a potentially significant saving of gift and estate taxes. A charitable “lead interest” at a rate determined by you is paid to the Hospital for a period of years also determined by you. The value of that gift (or lead interest) helps to discount the amount of the wealth transferred to your heirs that is exposed to gift and estate taxes. Those tax rates are currently the highest in use and can capture as much as 50 percent of the wealth transferred between generations.  Generally, the donor receives no immediate charitable income tax deduction.

Every year of the trust’s term an income will be paid to the Hospital. That income can be fixed in amount, or can vary from year to year based on an annual revaluation of the trust assets.

At the close of the trust term, the then principal of the trust is distributed to your heirs, according to your direction. Because you are deemed to have made a completed gift to your heirs when you created the trust, and paid any taxes due on the gift transfer at that time, the distribution to your heirs (often of greater value than the amount originally transferred in trust) is free of additional gift or estate taxes. The value of the trust principal passes outside your estate, which can help to reduce the overall tax rate on the balance of your estate.

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