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Part 48

Thomas M. Boles, 33°, Grand Cross
Director of Development
1761 East Woodcrest Avenue
La Habra, California 90631–3260
Tel 562–691–4227
Fax 562–691–5327

The Testamentary Trust offers many financial advantages.

Since I have been giving information on some different types of trusts, I thought it important to include the "Testamentary Lead Trust." The best planning for family members is to provide for distributions during their life of gifts, principal, and income from their estates. The lead trust is an excellent means for transferring principle to family members at a future time and saving substantial estate taxes while effecting this transfer. The donor directs that a portion of the estate be set aside into the lead trust. For a selected period of time, the trust pays income to charity.

After the term of years, the principal is distributed to family members. Since a substantial income payment will be made to charity, there can be a very large estate tax charitable deduction.

The donor selects the initial trust payout percentage, the term of years, and the percent of the estate which will be allocated to the trust. The initial lead trust payout percentage is multiplied times the initial net fair market value, and the amount is then distributed each year to charity. If there is any appreciation or accumulation in excess of the income amount, this can be retained in the trust and will eventually be passed through to family members.

The U.S. Treasury tables are used to value the charitable deduction based upon the annuity percentage and the term of years selected. For many lead trust, one-half to three-fourths of the initial value of the trust may be taken as an estate tax charitable deduction. The major benefit of the lead trust is the ability to transfer appreciating property to family members at very low tax cost. The property is initially valued as of the date of creation of the trust and, as noted above, the trust may enjoy a very substantial charitable deduction. If the property appreciates substantially during the terms of years, the value distributed to family members may be very much greater than the initial value of the trust. Many families have used lead trusts to transfer very large and valuable properties to family members at little or no tax cost.

This trust, often in conjunction with other trusts that provide income while the family is waiting for the lead trust’s principal, can be a truly dramatic way to pass great wealth to family members with little or no estate tax cost. Instead of my "ad" for the month, did you hear about the fellow who went into business on a shoestring and tripled his investment? Now he’s trying to figure out what to do with three shoestrings! Don’t forget we are open 24 hours a day, 7 days a week, every day of every month. With your help, we never stop taking care of children.


Please Note: This information is distributed with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expertise is required, the services of a competent professional should be sought. From: A Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers.


Thomas M. Boles
has worked extensively in fundraising for children’s programs throughout our Fraternity. For more information see coupon previous page, or call Tom at 562–691–4227 (Fax 562–691–5327) or the Scottish Rite Foundation, S.J., USA, at 202–232–3579, ext. 122.