Education is key in understanding what type of charitable trust is the best solution for you.

A planned gift to the Texas A&M Foundation should accomplish two major goals. First and foremost, it should use a giving method that best fits your lifestyle, preferences and available assets. Secondly, it should support your passions in Aggieland. Most people can quickly identify their passions. However, identifying the right planned giving vehicle to support those passions can be overwhelming because there are many methods, and some are quite complex.

Here’s the good news: The term “complex” isn’t bad. In planned giving speak, “complex” means more options and flexibility to tailor a planned gift specific to your situation.

Now that we’ve established that “complex” equates to “good” in planned giving, we can discuss trusts. Charitable trusts are very complex compared to most planned giving methods, but they offer much in return. From tax advantages to protecting minors to providing a steady stream of income payments and more, charitable trusts can greatly benefit you and your loved ones. 

While gift planning professionals, tax advisors and legal counsel should be consulted to determine if and which trust is right for you, let’s explore the two major types of charitable trusts—a charitable remainder trust and a charitable lead trust—to help equip you for that initial gift conversation.
 

ChAritable Remainder Trust

How it works:

  1. You establish the trust with the help of your legal counsel. At this time, you name the trust’s beneficiary or beneficiaries and set the duration of the trust. The trust can be put into effect immediately or after your lifetime.
     
  2. You gift assets to the trust.
     
  3. Your assets are invested, and income earned is paid annually to named beneficiaries—you or your loved ones—for the term you set. Terms can be up to 20 years or over the course of one or multiple lifetimes.
     
  4. Upon the trust’s termination, the remaining assets are gifted to Texas A&M University to support areas agreed upon by you and the Texas A&M Foundation.

Payment terms:

There are two main types of payment structures for charitable remainder trusts:

  1. Charitable Remainder Annuity Trusts (CRATs) – These distribute a fixed annuity amount per year; additional contributions are not allowed.
     
  2. Charitable Remainder Unitrusts (CRUTs) – These distribute a fixed percentage based on the annual balance of the trust assets; additional contributions are allowed.

Assets that can be used:

  • Cash
  • Publicly traded securities
  • Real estate
  • Some types of closely held stock
  • Other complex assets

Key benefits:

  • Payments for life, lives or term of years
  • Income tax deduction and savings for your gift
  • Possible capital gains tax avoidance
  • Supports Texas A&M and/or any other charitable organizations

A charitable remainder trust is ideal if you:

  • Want an immediate charitable deduction but would also like to provide a steady stream of income for yourself or loved ones.
  • Want to weave a trust into your estate plan to efficiently manage inheritance to heirs and also leave charitable gifts.
  • Want to support Aggieland by funding scholarships, research, world-renowned faculty members, campus building projects and more—WHOOP! 



Charitable Lead Trust

How it works:

  1. You establish the trust with the help of your legal counsel. At this time, you name the trust’s beneficiary or beneficiaries and set the duration of the trust. The trust can be put into effect immediately or after your lifetime.
     
  2. You gift assets to the trust.
     
  3. Your assets are invested, and income earned is paid annually to the Texas A&M Foundation to support your selected passions for the term you set. Unlike a charitable remainder trust, charitable lead trusts have much more flexible terms because payments are first made to the charity or charities you select. Terms are not held to the same mandatory 20-year time limit if you choose the fixed term option. There is also no minimum or maximum payment required to the charitable beneficiaries as long as payments are made annually.
     
  4. Upon the trust’s termination, the remaining assets are gifted to your named beneficiaries (typically yourself or loved ones).

Payment terms:

There are two main types of payment terms for charitable lead trusts:

  1. Charitable Lead Annuity Trusts (CLATs) – These distribute a fixed annuity amount per year.
     
  2. Charitable Lead Unitrusts (CLUTs) – These distribute a fixed percentage based on the annual balance of the trust assets.

Assets that can be used:

  • Cash
  • Publicly traded securities
  • Real estate
  • Some types of closely held stock
  • Other complex assets

Key benefits:

  • Reduces income, estate and gift taxes
  • Provides immediate support to Texas A&M
  • Donor can see the gift's impact during their lifetime (if the trust terms begin during the donor's life)

A charitable lead trust is ideal if you:

  • Need a solution to reduce, or potentially eliminate, estate and gift taxes.
  • Experience a windfall through inheritance or a major asset sale and want to use these funds later in life for retirement or to pass to loved ones, but also want to make a significant charitable gift during your lifetime.
  • Are considering creating a private or family foundation.
  • Want to see your gift impact Texas A&M during your lifetime, but also want to use your assets to support yourself or your loved ones in the future.



While this information will get you on the right path, please note that it is only an introductory guide. Connect with our gift planning experts at giftplanning@txamfoundation.com or by completing the form below to discuss the best solutions for your specific needs.

 

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