Charitable Lead Trusts

Non-Grantor Charitable Lead Annuity Trust

A non-grantor charitable lead annuity trust is a gift plan defined by federal tax law that allows you to transfer assets to family members at reduced tax cost while making a generous gift to Babson College.

As a lead annuity trust donor, you irrevocably transfer assets, usually cash or securities, to a trustee of your choice (for example, Babson College or a bank trust department).

During the lead annuity trust’s term, the trustee invests the trust’s assets and provides a fixed dollar amount each year to Babson College. These payments are used for the charitable purpose you designate and continue until the trust term ends or until the highly unlikely event that the trust distributes all its assets. The trust’s term may be for a specific number of years (10–20 years is common), one or more lifetimes, or a combination of the two. The payments are made out of trust income, or trust principal if the trust income is not adequate. If trust income during a given year exceeds the annual charitable payment, the trust pays income tax on the excess.

When the lead annuity trust term ends, the trust distributes all of its accumulated assets to family members or other beneficiaries named by you.

Non-Grantor Charitable Lead Unitrust

A non-grantor charitable lead unitrust is a gift plan defined by federal tax law that allows you to transfer assets to family members at reduced tax cost while making a generous gift to Babson College.

As a non-grantor lead unitrust donor, you irrevocably transfer assets, usually cash or securities, to a trustee of your choice (for example, Babson College or a bank trust department).

During the lead unitrust’s term, the trustee invests the unitrust’s assets. Each year, the trustee pays a fixed percentage of the unitrust’s current value, as revalued annually, to Babson College.

If the unitrust’s value goes up from one year to the next, its payout to Babson College increases proportionately. Likewise, if the unitrust’s value goes down, the amount it donates also goes down. These payments are used for the charitable purpose you designate.

The lead unitrust’s term may be for a specific number of years (10–20 years is common), one or more lifetimes, or a combination of the two. Payments are made out of trust income, or trust principal if the trust income is not adequate. If trust income exceeds the charitable payment in a given year, the trust pays income tax on the excess.

When the lead unitrust term ends, the unitrust distributes all of its accumulated assets to family members or other beneficiaries named by you. You may add funds to your unitrust whenever you like.

Benefits Include:

• You will qualify for a federal gift tax deduction.
• Babson College will receive annual payments from your trust for a term of years, or for another term you designate.
• The beneficiaries of your trust (for example, family members) will receive all of the trust’s assets when the trust terminates. Any asset growth that occurs within the trust will be distributed to your trust’s beneficiaries free of gift or estate tax.
• Your estate may enjoy reduced probate costs and estate taxes.
• You will become a member of the Roger and Grace Babson Legacy Society.
• You will provide generous support to Babson College.

*Note: The information on this site is not intended as legal, "tax" or investment advice. For such advice, please consult an attorney, "tax professional" or investment professional.