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     D) Capital Growth Charitable Sub-Trust


The Capital Growth Charitable Trust (CGT) is a non-qualified, income distribution charitable trust. It is designed to benefit the grantor’s favorite charity(s) through his Revocable Living Trust after his decease and to regulate and control the sequences of outright distributions of his estate for the benefit of his children. It works in a fashion similar to the Charitable Remainder Trust. The difference is that the ultimate distributions to charity will not be deductible; conversely, however, the CGT provides more flexibility to the grantor’s plan than a qualified charitable trust.


 

A typical CGT will be funded, at the grantor’s decease, with a value of one-half of the total trust estate (the other one-half goes to the grantor’s children, outright, immediately upon the grantor’s decease). The one-half value held IN TRUST shall be used to generate income to the grantor’s favorite charity for a pre-selected period of time. After the payout period, the remainder value is distributed outright to the grantor’s children.

A reverse method can be used where all income from the CGT would be paid out to the grantor’s children for, say, 12-15 years (the approximate time it takes for the total value of the aggregate distributions to equal the principal value generating that aggregate income at interest-bearing market rates). After the payout period, the remainder amount of the CGT is distributed to the charity. The net effect is that the grantor’s children received an aggregate income stream over the payout period equal to the full amount allocated, and ultimately distributed, to charity.


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