Charitable Lead Trust

How it works

1. You contribute cash, securities or other property to a trust.
2. The trust makes fixed annual payments to the American Red Cross for a specified term of years.
3. When the trust ends, the remaining principal goes to your heirs.

Benefits

• You qualify for a gift tax deduction for the present value of the annuity payments to the Red Cross.
• The annuity payments and the term of the trust can be specified in such a way so as to reduce or even eliminate the transfer taxes due when the principal reverts to your heirs.
• All appreciation that takes place in the trust goes tax-free to your heirs.
• You can use your available estate tax credit ($2.0 million per person beginning in 2006) to further reduce taxes on transfers to your heirs.
• You can have the satisfaction of making a significant gift to the Red Cross now that reduces taxes due to transfers to your heirs later.