• Gift Planning Home
• Donor Stories
• Gifts-at-a-Glance
• IRA Rollover
• Create Your Plan
• Personal Profile
• Meet the Staff
• Finance News
• Reading Room
• Donor eNewsletter
• FAQs
• Glossary
• Professional Advisors
• Calculator
• Tax References
• Advisor eNewsletter
• Contact Us
• Giving to UTHSC-H Home

Charitable Lead Trusts

> You're considering a gift in partnership with the UT Health Science Center
> Your planning objective is estate preservation
> You want to reduce gift and estate taxes rather than income tax

A lead trust holds appreciating assets, pays income to The University of Texas Health Science Center at Houston for a period of years, and then passes the remaining principal back to you -- the version known as a grantor lead trust -- or to beneficiaries you have selected -- the non-grantor lead trust. The non-grantor lead trust offers you more significant tax benefits, and we will primarily focus on its features here.

The non-grantor lead trust reduces the cost of passing property to your heirs in two ways. First, the value, for estate and gift tax purposes, of the assets you place in your lead trust will be reduced by the present value of the income that the trust will pay the Health Science Center. Second, the taxable value of the lead trust's assets is fixed at the time you establish the trust -- any subsequent increase in the value of the assets will pass to your heirs outside your estate and thus free of estate or gift tax.

This combined reduction in the taxable value of the assets means that your family can often receive more from an estate plan containing a non-grantor lead trust than they could from an outright bequest from you.

The lead trust also offers you these additional features:

• It can be funded with shares in a growing family business, thus lowering the tax cost of passing ownership on to the next generation.
• The income earned by a non-grantor lead trust while it is in operation is not taxable to you.
• The trust can run for a term of years or for your lifetime.
• The lead trust is the only income-gift that delivers immediate benefits to the Health Science Center.
• The longer the lead trust pays the Health Science Center income, and the more income it pays us, the larger your estate and gift tax deduction will be.
• You or a financial advisor can serve as trustee, or the Health Science Center can serve.

Your business is on a growth track, and your children are learning the ropes fast. Your planning priority is to keep the enterprise that you worked so hard to establish intact for them to inherit and enjoy.

As your gift to the UT Health Science Center, you place $500,000 worth of your company's stock in a non-grantor lead trust. The trust will pay the Health Science Center a 6 percent annuity for 20 years, either in dividends or in additional shares of stock. You estimate that you will have additional assets totaling $1,500,000 in 20 years and that your assets will grow at an average rate of 5% per year. You have already given your children the maximum that may be transferred free of gift and estate tax.

Here are the benefits to you and your family of the lead trust, compared with those of a direct bequest to the children and no gift to us:

How Do I Create a Charitable Lead Trust?

Setting up a charitable lead trust is not particularly difficult, but you should be advised by an attorney with expertise in the area of charitable trusts and estate planning. To save you time and expense, we can provide you with an initial draft of the lead trust agreement for review by you and your attorney. Once your trust agreement is signed, you can fund your lead trust by transferring assets to your trustee.

Email us, complete the personal profile form, or call us at 713-500-3200 so that we can assist you through every step of the process.

The University of Texas Health Science Center at Houston
7000 Fannin, Suite 1200
Houston, TX 77030
713-500-3200 | 713-500-3216 (fax)
E-mail: Shirley.Druggan@uth.tmc.edu