A charitable lead trust is a proven method for transferring assets to children or grandchildren, while sharply reducing gift and estate taxes.

Under federal law, estates valued at more than $2 million are subject to taxation. In a charitable lead trust, donors can offset those taxes through gifts to Princeton (and other charities they designate).

Here’s how charitable lead trusts work. Donors transfer assets of at least $250,000 to the trustee (Princeton or their preferred trust company). The trust pays an annual sum to the University for a term, typically 10 to 20 years. When the term ends, trust assets are transferred to the donor’s children or grandchildren. The payments to charity offset gift, estate, and generation-skipping taxes: the longer the trust term and the higher the charitable contributions, the lower the taxes due.

• Federal gift and estate-tax deductions for the value of annual trust payments to Princeton

• At the trust’s cessation, trust assets go to the family estate-tax free.

• Trust assets are managed by a trustee of your choice. If you elect to have Princeton manage your trust, some of the same skilled investment professionals who handle Princeton's endowment will oversee the investment of your trust in a diversified portfolio of stocks and bonds.

You can establish a charitable lead trust during your lifetime (“inter vivos”) or through your will. Because of estate-planning advantages, charitable lead trusts are typically established with a gift of at least $1 million.

If you would like to discuss how a charitable lead trust might work for you, contact the Office of Gift Planning at 609.258.6318 or e-mail 1746soc@princeton.edu