AVENUES FOR giving
- University of Hawaiʻi Foundation
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Bachman Hall 105
Honolulu, HI 96822 - Phone: (808) 956-8849
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Fax: 808-956-5115 - Send email >>
Planned Gifts
Charitable Lead Trust
Carol Kim, 70, has a $7 million estate and is very concerned about gift and estate taxes. Carol and her late husband Jon worked hard for many years, and she does not want to see their hard work cut in half by gift and estate taxes. Accordingly, Carol has three primary estate planning goals. First, she does not want to pay any gift and estate taxes. Second, Carol wants to pass a significant amount of her estate to her children. Third, she wants to fund a significant endowment at the UH Foundation in memory of her late husband.
With no planning, it would be impossible to achieve Carol’s goals. However, with the implementation of a charitable lead trust in conjunction with a will, Carol’s objectives can be accomplished.
After meeting with her advisors, Carol decides to fund a $5 million charitable lead trust. The trust will have a 7% payout and last for 15 years. At the end of the 15 years, all of the trust assets will pass to Carol’s children. There are multiple benefits of this plan.
First, there will be a $4 million charitable gift tax deduction as a result of creating this charitable lead trust. By applying Carol’s $1 million gift tax exemption and the $4 million gift tax deduction, there will not be any gift or estate taxes on the $5 million transfer! Assuming an 8% return over the next 15 years, Carol’s children would actually receive over $6.3 million, which is a very nice inheritance. In addition, the UH Foundation would receive $5.25 million over the life of the trust.
Carol is amazed at these figures. Starting with $5 million of assets, Carol is able to provide her family with over $6 million and her beloved charity with over $5 million -- for a total well over $11 million. Just as importantly, not one dollar will be paid in gift or estate taxes.
As for the rest of her estate, she plans on using her remaining estate tax exemption for future gifts to her children. Any assets in excess of her estate tax exemption will simply flow into the endowment the lead trust distributions established. Again, this planning will result in zero gift and estate tax.
For more information on charitable lead trusts, please email giftplanning@uhf.hawaii.edu or contact Lani Starkey at 808-956-8034. We are happy to provide you with a complimentary charitable lead trust illustration and proposal personalized for your unique situation and objectives.