Charitable Lead Trusts

Charitable Lead Trusts

Article posted in Charitable Lead Trust on 26 June 2003| comments
audience: Partnership for Philanthropic Planning, National Publication | last updated: 16 September 2012
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Summary

In this edition of Gift Planner's Digest, Robert Lew and Darryl Ott, Esq. provide a concise overview of the variety of charitable lead trusts and provide eight creative case studies that illustrate their application.

Case Study Four: Silicon Student

(Intervivos, CLAT, and Grantor)

Steven J., like most computer engineers living in the Silicon Valley of California, wants to start his own company and go public as soon as he can. He has saved more than $150,000 for the start of his business. However, in an effort to help insure the company's success, he decides to return to Stanford University for three years for some special training. Upon receiving his acceptance paperwork from his graduate program, he realizes that he has a potential financial problem. If he uses some of his hard saved assets for his education, he will not have enough money to start his company. Since it is unlikely that a bank will finance his business even when he gets out of Stanford, he decides that he must keep his $150,000 intact.

So Steve applies for student aid and is told that Stanford's student loan program is available only to students who have no access to cash or other assets that may be used towards their education. After doing some research, Steve decides to establish a three-year, 5%, charitable lead annuity trust on behalf of the University.

So the results of Steve's establishment of the CLAT will be: 1) three $7,500 contributions to the University; 2) his completion of the special training that he needs to successfully start his company; 3) the business startup money in the sum of $150,000 kept intact; and 4) unfortunately, the existence of a student loan that Steve will repay with the profits from the first sale of his publicly traded stock at his company's IPO.

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