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THE EVOLUTION OF FINANCIAL INTELLIGENCE
NavigatiNg WiNds of ChaNge—expert adviCe for 2012
15
WORTH.COM
VOLUME 20
|
EDITION 06
Boston, MA
Leading Advisor
Fidelity CharitableSM
Jill Weiner, JD, LLM, Director of Compliance and Risk Management
“
”
Why is now the time to leverage a
charitable lead trust?
By Jill Weiner
The current low interest rate environment has created an increased buzz
in the estate planning community
about charitable lead trusts (CLTs).
A CLT is a charitable giving vehicle
that makes lead payments to the charities of the donor’s choice for a term of
years or a person’s lifetime, and pays
the remainder to one or more persons
chosen by the donor, typically family
members or family trusts.
CLTs are flexible. There is no required
minimum or maximum payment to the
charitable beneficiaries, so long as
payments are made at least annually,
and the trust can be set up during the
donor’s lifetime or by will. A CLT can
be either a grantor or non-grantor trust,
but this article focuses on non-grantor
CLTs, which are most commonly used
in estate planning. Despite their flexibility, the rules surrounding CLTs
are complicated, so donors should be
sure to work closely with their legal
and tax advisors.
Although donors to non-grantor
CLTs are not entitled to an income tax
deduction for their contributions, and
although the trust is not itself a taxexempt entity, a CLT is nevertheless an
effective tax-planning tool. A CLT can
be an efficient way to transfer assets for
estate and gift tax purposes. Additionally, the donor is not subject to any tax
on income earned by a CLT, and the
trust itself is entitled to an unlimited
income tax charitable deduction for its
payments to the lead charities.
One important consideration is
that the donor to a non-grantor CLT
must cede control over the trust once
it has been created. Therefore, donors
may not change the charitable organization holding the lead interest, nor
can a private foundation controlled
by the donor hold the lead interest.
Many donors find a donor-advised
fund (DAF) to be an optimal solution, because a DAF can hold the lead
interest to receive the income, while
allowing the donor to retain advisory
privileges, but not actual control.
A non-grantor charitable lead
annuity trust (CLAT), which makes
fixed annuity payments to the lead
charities, can present a significant
planning opportunity when set up
during a donor’s lifetime. For estate
and gift tax purposes, a contribution
to a non-grantor CLAT is allocated
between the lead interest and the
remainder interest. A specific calculation is used to determine the present
value of the lead interest that will be
paid to charity; this is done using the
IRS’s 7520 rate, an interest rate set
monthly. The 7520 rate is currently at
historic lows, hovering between 1.4
and 3.0 percent in 2011.
When the 7520 rate is low, the
present value of the lead interest to
charity will be high, leaving a smaller
value to the remainder interest,
which is the portion subject to estate
and gift taxes. In fact, donors can even
“zero out” the amount allocated to the
remainder (taxable) portion by adjusting the amount and duration of the
payments that will be made to charity.
Moreover, if the CLAT’s assets grow
at a rate that exceeds the 7520 rate,
the value of that additional return will
pass to the remainder beneficiaries at
the end of the CLT term, free of estate
or gift tax.
The bottom line is this: There is no
time like the present for charitably
inclined individuals to take advantage
of the planning opportunities afforded
by CLTs.
Fidelity Charitable (FC) is the brand name for Fidelity® Charitable Gift Fund, a sponsoring public charity of donor-advised funds. The Fidelity Charitable name
and logo are service marks, and Fidelity is a registered service mark, of FMR LLC, licensed to FC. 596685.1.0
MAKE
How to reach Jill Weiner
GROW
I look forward to discussing how to
maximize your charitable gift. I can be
reached at 800.280.6357.
LIVE
“A CLT can be an
efficient way to transfer
assets for estate and
gift tax purposes.”
– Jill Weiner
FIDELITY CHARITABLE SM
WHAT’S O N MY DESK ...
Coffee, and pictures of my
family and my greyhound
M Y H OB B I E S ARE…
Cooking, gardening, spending time with
my family, and running
IF I WER EN ’T A L EADIN G
ADVISO R , I’D BE…
A professional home organizer
About Jill Weiner
ILLUSTRATION BY NANCY JANUZZI
Jill Weiner is the director of compliance and risk management for Fidelity CharitableSM, a public charity with
a donor-advised fund program. She is responsible for the charity’s compliance with laws applicable to donoradvised funds and provides guidance to business partners on the tax aspects of charitable giving. Before joining
Fidelity Charitable in 2005, Ms. Weiner worked for the law firm of Tybout Redfearn & Pell. She earned her JD
degree from Villanova University School of Law in 2003 and an LLM degree in taxation from Boston University
School of Law in 2010. She is a 1999 graduate of Union College.
Professional Experience
7 years
Professional Services Provided
Charitable planning services
Website www.fidelitycharitable.org
Education
LLM, taxation, Boston University School of Law; JD, Villanova University
School of Law; BS, mathematics, Union College
Email jill.weiner@fmr.com
Fidelity CharitableSM
200 Seaport Boulevard, Boston, MA 02210
800.280.6357
WORTH.COM
DECEMBER-JANUARY 2012
101
W
Jill Weiner, JD, LLM
Director of Compliance and Risk Management
Fidelity CharitableSM
200 Seaport Boulevard
Boston, MA 02210
Tel. 800.280.6357
jill.weiner@fmr.com
www.fidelitycharitable.org
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