3.6.5 Layered Lead Trusts

Case Studies on Layered Lead Trusts

Four Charitable Lead Trusts Teach an Old Dog New Tricks:   Billy Jacobs, 45, was born in 1957 in Boston, Massachusetts, with a silver spoon in his mouth. Billy was the first and only child of multimillionaires Ralph and Martha Jacobs. However, Billy had very little parental involvement in his life. Martha passed away when Billy was very young, and Ralph, a notorious workaholic, was rarely home. Thus, Billy spent much of his childhood away from home at private schools. A product of little parental guidance and a very generous weekly "allowance," Billy grew up to be a poster child "spendthrift son." At the age of 45 and still receiving his weekly allowance, Billy is unmarried, unemployed, and has no savings.

Testamentary Lead Trusts in Four Layers:   Robert White, age 65, is a successful real estate investor. The bulk of his estate, valued at $7 million, consists primarily of real estate. He currently owns two apartment buildings, each valued at $l.5 million, and two strip malls valued at $1 million each. His other estate assets include his personal residence valued at $500,000 and a portfolio of stocks, bonds and mutual funds. The apartment buildings and the strip malls were acquired over the years via a series of like-kind exchanges as allowed under Sec. 1031 of the Internal Revenue Code. Therefore, Robert's tax basis in these properties is extremely low. Also, each of the properties is performing very well, yielding on average a net income of 10%, not including capital growth averaging 2% over the years.

Treat Your Grandchildren (and Charity) Well:   Ginger Goodman is age 70 and is in poor health. Even though she is not expected to live for more than four years, she is still fully capable of handling her affairs. Ginger's spouse passed away five years ago as a result of a heart attack, and she has three children and five grandchildren. Through the use of a family limited partnership, Ginger has been able to transfer substantial wealth to her children and now would like to benefit her grandchildren with the assets remaining in her $3.1 million estate. Her grandchildren range in ages from 10 to 18 years old and, therefore, she feels that they are still too young to handle a large inheritance. However, she would like to give them a small inheritance when she passes away to help them with a college education and also "get started" in life. She would like to delay any large inheritance for a period of at least 20 years, until the youngest is 30 years of age.