Provide for Your Loved Ones and Northwestern

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If you want to benefit from the tax savings that result from supporting Northwestern, but you don’t want to give up any assets that you want your family to receive someday, you may want to consider a charitable lead trust. This gift arrangement enables you to make a significant gift to Northwestern and transfer assets to one or more beneficiaries, usually children or grandchildren. Income payments from the trust would be directed to Northwestern for a set number of years, after which the remaining assets transfer to your beneficiary or beneficiaries.

There are two ways charitable lead trusts make payments:

A charitable lead annuity trust pays a fixed amount each year to Northwestern.

A charitable lead unitrust pays a variable amount each year based on the value of the assets in the trust. With a unitrust, if the trust’s assets go up in value, the payments to Northwestern go up as well. At the end of the trust period, the principal is transferred to you or heirs.

In addition to the annuity and unitrust variations, a CLT may be created as a “grantor” or “non-grantor” trust. In a “grantor” charitable lead trust, the trust principal is paid back to you, the grantor (or your estate), at the end of the term. A transfer to this type of trust provides a current income tax deduction. In a “non-grantor” charitable lead trust, the remainder interest in the trust typically passes to your children or other family members at the end of the term. If the non-grantor charitable lead trust is created during your life, you may receive a gift tax deduction for the value of the charitable income interest.

Potential Scenario

Man smiling George would like to support Northwestern and provide for his children. Following his adviser’s recommendation, George funds a charitable lead annuity trust with assets valued at $2,500,000.

George’s trust pays $175,000 (7 percent of the initial fair market value) to Northwestern each year for 15 years, which will total $2,625,000. After that, the balance in the trust goes to his children. Assuming a 6 percent investment return, the children will receive approximately $1,918,101.

His gift tax deduction is $2,182,775* against the $2,500,000 of assets. Therefore, only the difference ($317,225) is subject to gift tax, which is offset against his lifetime gift tax exclusion. The remaining trust assets and all growth will pass to his family at zero additional cost in gift and estate taxes. Had George given the $2,500,000 outright to his children, it would have been a taxable gift.

*Assuming annual payments and a 2.4 percent charitable midterm federal rate.

Learn How to Fund A Charitable Lead Trust

You can use the following assets to fund a charitable lead trust:

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Gift Illustrator

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Next Steps

  1. Contact Northwestern Gift Planning at 800-826-6709 or giftplanning@northwestern.edu to talk about supporting Northwestern by setting up a charitable lead trust.
  2. Seek the advice of your financial or legal adviser.
  3. If you include Northwestern in your plans, please use Northwestern’s legal name and federal tax ID number.

Legal Name: Northwestern University
Address: 633 Clark Street, Evanston, Illinois 60208
Federal Tax ID Number: 36-2167817

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A charitable bequest is one or two sentences in your will or living trust that leave to Northwestern a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.

an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan

"I, [name], of [city, state, ZIP], give, devise and bequeath to Northwestern [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."

able to be changed or cancelled

A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.

cannot be changed or cancelled

tax on gifts generally paid by the person making the gift rather than the recipient

the original value of an asset, such as stock, before its appreciation or depreciation

the growth in value of an asset like stock or real estate since the original purchase

the price a willing buyer and willing seller can agree on

The person receiving the gift annuity payments.

the part of an estate left after debts, taxes and specific bequests have been paid

a written and properly witnessed legal change to a will

the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will

A donor advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to Northwestern or other charities. You cannot direct the gifts.

An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.

Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.

Securities, real estate, or any other property having a fair market value greater than its original purchase price.

Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.

A charitable remainder trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create.

You give assets to a trust that pays our organization set payments for a number of years, which you choose. The longer the length of time, the better the gift tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.

You fund this type of trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to Northwestern as a lump sum.

You fund this trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to Northwestern as a lump sum.

A beneficiary designation clearly identifies how specific assets will be distributed after your death.

A charitable gift annuity involves a simple contract between you and Northwestern where you agree to make a gift to Northwestern and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.

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