Everything you always wanted to know about charitable lead trusts but were afraid to ask.

By Kathleen Stephenson and Lisa B. Petkun

The donor will be entitled to a gift-tax charitable deduction of $115,825. In effect, the donor will be able to transfer $500,000 of assets — and all the appreciation on those assets — to the non-charitable beneficiary while only making a taxable gift of $384,174.

If the applicable federal rate was 4.6 percent, the value of the interest passing to the non-charitable beneficiary drops to $381,890 and the charitable deduction increases.

How to minimize the transfer tax impact
While charitable lead trusts are always an effective means of benefiting a charity while reducing the transfer tax cost of passing assets to non-charitable beneficiaries, they’re particularly beneficial when interest rates are low.