|
|
|
|
|
The Term of Years Foundation is a twist on the time-honored Charitable Lead Trust. While Charitable Lead Trusts can assume varied forms, a Term of Years Foundation is created upon the death of the donor. The named charitable income beneficiary is a Private Family Foundation, and the donor's grandchildren act as remainder beneficiaries. The Term of Years Foundation features tremendous estate tax savings, generation-skipping transfer tax savings, and the opportunity to make a significant philanthropic contribution. These benefits were the motivating factors behind Mrs. Jacqueline Kennedy Onassis' decision to implement such a strategy. Sources have reported that Mrs. Onassis' will places her residual estate into the "C&J Foundation" (named after Caroline and John), which will pay to various charities "eight percent of the initial net fair market value of the assets of the Foundation" each year for 24 years. After 24 years pass, the Foundation will distribute its assets to Mrs. Onassis' grandchildren. Calculation of the estate tax charitable deduction, generated by Mrs. Onassis' charitable gift, hinges upon several factors, such as the term, the payout percentage chosen, as well as complex interest rate calculations specific to "split interest" gifts. Based upon applicable interest rates, the C&J Foundation's "term of years" of 24 years, and the 8% payout percentage chosen, that will amount to a deduction equaling as much as 97% of the total assets gifted to the Foundation. The remainder (3%) of Mrs. Onassis' residuary estate (estimated by some news reports to top $100 million) may be subject to estate taxes. Consider this: if the Foundation assets earn an annual return of approximately 10%, even after the imposition of generation-skipping transfer taxes and estate taxes, Mrs. Onassis' heirs should receive almost the entire residuary estate of $100 million intact in 24 years. The C&J Foundation's charitable contributions should also be remarkable. Based upon the $100 million estimate of the residuary estate, and an anticipated annual payout of $8,000,000 ($100 million x 8%), the Foundation should distribute a staggering $192 million over the next 24 years to charitable recipients. Fortunately, individuals owning estates much smaller than Mrs. Onassis' can still realize dramatic tax savings and make a substantial charitable contribution by implementing their own Term of Years Foundation.
|
|
|
|
|
|
|
 |
|
|||||||||
