Charitable Lead Trust
PROTECT YOUR ASSETS
You can benefit from the tax savings that result from supporting Birmingham Landmarks/Alabama and Lyric Theatres 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 Birmingham Landmarks:
A charitable lead annuity trust pays a fixed amount each year to Birmingham Landmarks/Alabama and Lyric Theatres 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 Birmingham Landmarks/Alabama and Lyric Theatres go up as well.
AN EXAMPLE OF HOW IT WORKS
George would like to support Birmingham Landmarks/Alabama and Lyric Theatres and provide for his children. George received a windfall amount of income and needs a large income tax deduction to offset the income. Following his advisor's recommendation, George funds a grantor charitable lead annuity trust with assets valued at $1,000,000. George's trust pays $70,000 (7 percent of the initial fair market value) to Birmingham Landmarks/Alabama and Lyric Theatres each year for 15 years, which will total $1,050,000. After that, the balance in the trust reverts back to George. He receives an income tax charitable deduction of $854,311. Assuming the trust earns an average 6 percent annual rate of return, George receives approximately $767,240 at the end of the trust term.
*Assuming annual payments and a 3.2 percent charitable midterm federal rate.