Kellogg World Alumni Magazine, Winter 2003Kellogg School of Management
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Spotlight on charitable lead trusts

Now may be the time to consider establishing a charitable lead trust in support of the Kellogg School and Northwestern University. This trust enables you to combine charitable gifts to Kellogg or the university with the transfer of assets to family members at reduced gift tax cost. As a lead trust donor, you can irrevocably transfer assets, usually cash or securities, to the trustee of your charitable lead trust.

(Most of these features apply to all lead trusts, but a few are specific to the nongrantor annuity lead trust).

1. The lead trust will make annual payments to Kellogg/Northwestern for a predetermined number of years, giving you the satisfaction of supporting the university in a meaningful way.

2. The assets remaining in the trust at term’s end, plus any appreciation, will pass to your heirs with reduced or no gift/estate tax cost.

3. When the trust is established, gift tax may be due on the noncharitable element of the trust unless the unified credit is used. However, you will receive a gift tax deduction for the charitable element of the trust. It is possible, with the right combination of term and percentage payout to Northwestern, to "zero-out” the gift tax.

4. The trust becomes a separate entity for tax purposes. Any taxable income earned by the trust may be offset by the charitable deduction for the annual gifts to Northwestern.

5. Highly appreciated securities in the trust may be used for the annual gifts to Northwestern, allowing the trust to bypass capital gains tax that would be due if the securities were sold.

6. When grandchildren are beneficiaries of the trust, generation-skipping taxes may be substantially reduced.

7. Funding a lead trust with stock of a family-owned business will freeze the value of the stock for gift/estate tax purposes.

If you wish to learn more about establishing a charitable lead trust at Kellogg, please contact Stephanie Freeth ’02 in the Kellogg Development Office at 847-491-3348.

©2002 Kellogg School of Management, Northwestern University