To: Prospective Donor

PO Box 162Tel: 707-925-0201

Leggett, CA 95585-0162

Website:

To: Prospective Donor

RE: Charitable Lead Trusts

Dear Prospective Donor,

Enclosed in this PDF are several sample charitable lead trusts. We also have forms for sample charitable remainder annuity trusts and for charitable remainder unitrusts if you are interested. If you have any further questions about giving through a will or a trust or about the mission of Rangjung Yeshe Gomde California, please contact . You can also call (707) 925-0201.

Sincerely,

Steve Mains

Fundraising Manager, Rangjung Yeshe Gomde California

I. Trust Form 1: Inter Vivos Qualifying Non-grantor Charitable Lead Annuity Trust (CLAT)[1]

As all of these documents show, there are many ways for a donor to make a substantial gift to his favorite charity while possibly improving his financial position for the future. This is nowhere more true than with the charitable lead trusts. These trusts can help save a donor a lot of money on estate taxes while providing money to his favorite charity for a number of years.

For example, suppose a donor had ten million dollars of closely held stock in his business. He has a total current income of $500,000 per year. He knows that when he dies that estate taxes may take up to half the value of his business. He wants his business to go on to his children after he dies, but he would love to be able to help his favorite charity until then.

With a charitable lead trust, he may be able to accomplish his goals. First, he will transfer five million of his closely held stock into a twenty year 6% charitable lead annuity trust when he is fifty. At that time, he will have to pay gift taxes on the remainder value of the trust that will pass on to his children at the end of the trust term. This is much better than if he had given outright the property in the trust to his children because he would have had to have paid gift taxes on all of the trust property right now. When you consider that gift taxes are nearly 50% of the amount of the property, this can add up to a substantial sum.

During the term of the trust, the charity will receive the annuity payment that is the fixed percentage times the value of the trust assets at the time of the trust creation. In this case, the charity would receive $300,000 every year for twenty years. Thus, the charity will eventually receive $6 million dollars from this trust.

At the end of the trust term, the property goes to the children of the donor. The best part for the donor is that the property’s appreciation in the intervening years is not taxed by gift or estate taxes. This can substantially reduce the estate tax burden on the donor’s estate.

Yet, there are a number of things to watch out for with these trusts. First, these trusts are fully taxable. They receive a charitable deduction for the amount that goes to the charity. So, if the trust makes more money than the annuity amount in a given year, it will owe ordinary income taxes on that amount. Additionally, if the trust sells assets of over one year, it will incur capital gains taxes like any individual. Finally, because this is an annuity trust, this trust will pay out the same amount to the charity every year of its term. Thus, if trust assets grow over time, the trust may pay more and more income tax on its income over the annuity amount.

If you or your advisors have any questions, please do not hesitate to give us an email at .

DECLARATION OF TRUST KNOWN AS THE______[NAME] CHARITABLE LEAD ANNUITY TRUST

______[Name], of ______[city], California (the "Trustee"), declares that ______[name of sole grantor] (the "Trustor"), has transferred and delivered or will transfer and deliver to the Trustee, without consideration from the Trustee, the property described in Schedule ______attached to this instrument, which is the separate property of the Trustor.

The Trustor intends to establish a charitable lead annuity trust in which the value of the Annuity Amount payable to the Charitable Organizations in accordance with Article I of this instrument will qualify for the gift tax charitable deduction under Internal Revenue Code section 2522(c)(2)(B) [26 U.S.C.A. § 2522(c)(2)(B)], and for the estate tax charitable deduction under Internal Revenue Code section 2055(e)(2)(B) [26 U.S.C.A. § 2055(e)(2)(B)], or any corresponding or substitute provisions applicable to the Trust estate, and in which some or all distributions made to the Charitable Organizations from items included in the gross income of the Trust, in payment of the Annuity Amount, will qualify for the income tax charitable deduction under Internal Revenue Code section 642(c) [26 U.S.C.A. § 642(c)]. This Trust shall be known as the "______[NAME] CHARITABLE LEAD ANNUITY TRUST" (the "CLAT").

The interest received by the Trustee in the property described in Schedule ______shall constitute the Trust estate and shall be held, managed, and distributed as provided in this instrument. Throughout this Trust, the singular shall include the plural wherever necessary, and one gender shall include any other gender wherever necessary.

ARTICLE I

ANNUITY PAYMENTS DURING TERM OF ANNUITY INTEREST

1.1 Payment of Annuity Amount.

[Choose one of the following as appropriate:]

[EITHER: Option 1, if single charity:]

In each taxable year of the Trust until the date of termination of the annuity interest in accordance with Paragraph 1.5 of Article I of this instrument, the Trustee shall pay the Annuity Amount to ______[name of qualified charitable lead beneficiary] (the "Charitable Organization") for such use or uses as its governing body, in its sole discretion, shall determine.

[OR: Option 2, if several charities:]

In each taxable year of the Trust until the date of termination of the annuity interest in accordance with Paragraph 1.5 of Article I of this instrument, the Trustee shall pay the Annuity Amount ______[in equal shares or in the shares set forth below], to the following charities (the "Charitable Organizations"], on the following terms and conditions: ______[Name of each charity and share it is to receive], for such use or uses as its governing body, in its sole discretion, shall determine.

For purposes of this Paragraph 1.1, the Annuity Amount shall be an amount equal to ______percent (______%) ______[not more than 60 percent to avoid application of 26 U.S.C.A. §§4943 and 4944] of the net fair market value of the assets of the CLAT, valued as of the date of execution of this Trust. The Annuity Amount shall be paid in ______[one annual payment or equal ______(monthly or quarterly or semi-annual) payments] from income and, to the extent income is not sufficient, from principal, on the last day of ______[the year or each such period], or within a reasonable period of time thereafter. Any income of the CLAT for a taxable year in excess of the Annuity Amount shall be added to principal.

1.2 Protective Distribution If Charitable Organization Not Qualified Charity.

[Choose one of the following as appropriate:]

[EITHER: Option 1, limit lead beneficiaries to public charities:]

Notwithstanding the provisions of Article I, Paragraph 1.1 of this instrument, if ______[the Charitable Organization or any one or more of the Charitable Organizations] is not an organization described in Internal Revenue Code sections 170(b)(1)(A), 170(c), 2522(a), and 2055(a) [26 U.S.C.A. §§170(b)(1)(A), 170(c), 2522(a), and 2055(a)] when the Annuity Amount ______[, or any portion of that amount,] is distributed in accordance with Paragraph 1.1, the Trustee shall distribute the Annuity Amount, or any portion, otherwise distributable to such ______[Charitable Organization or Charitable Organizations to those Charitable Organizations that are organizations described in Internal Revenue Code sections 170(b)(1)(A), 170(c), 2522(a), and 2055(a), on a pro rata basis. If none of the Charitable Organizations are organizations described in Internal Revenue Code sections 170(b)(1)(A), 170(c), 2522(a), and 2055(a) when the Annuity Amount, or any portion, is to be distributed in accordance with Paragraph 1.1, the Trustee shall distribute the entire Annuity Amount] to one or more organizations described in Internal Revenue Code sections 170(b)(1)(A), 170(c), 2522(a), and 2055(a) as the Trustee shall select, in the Trustee's sole discretion, to carry out the general charitable intent of the Trustor.

[OR: Option 2, lead beneficiaries may include private nonoperating

foundations:]

Notwithstanding the provisions of Article I, Paragraph 1.1 of this instrument, if ______[the Charitable Organization or any one or more of the Charitable Organizations] is not an organization described in Internal Revenue Codesections 170(c), 2522(a), and 2055(a) [26 U.S.C.A. §§ 170(c), 2522(a), and 2055(a)] when the Annuity Amount ______[, or any portion of that amount,] is distributed in accordance with Paragraph 1.1, the Trustee shall distribute the Annuity Amount ______[, or any portion, otherwise distributable to such Charitable Organizations to those Charitable Organizations that are organizations described in Internal Revenue Code sections 170(c), 2522(a), and 2055(a), on a pro rata basis. If none of the Charitable Organizations are organizations described in Internal Revenue Code sections 170(c), 2522(a), and 2055(a) when the Annuity Amount, or any portion, is to be distributed in accordance with Paragraph 1.1, the Trustee shall distribute the entire Annuity Amount] to one or more organizations described in Internal Revenue Code sections 170(c), 2522(a), and 2055(a) as the Trustee shall select, in the Trustee's sole discretion, to carry out the general charitable intent of the Trustor.

1.3 Proration of Annuity Amount. In determining the Annuity Amount to be paid to the Charitable ______[Organization or Organizations] under Article I, Paragraph 1.1 of this instrument, the Trustee shall prorate the Annuity Amount on a daily basis for a short taxable year in accordance with Treasury Regulations section 1.664-2(a)(1)(iv)(a) [26 C.F.R. § 1.664-2(a)(1)(iv)(a)], and for the taxable year ending on the date of termination of the annuity interest under Article I, Paragraph 1.5 of this instrument, in accordance with Treasury Regulations section 1.664-2(a)(1)(iv)(b) [26 C.F.R. § 1.664- 2(a)(1)(iv)(b)].

1.4 Taxable Year of CLAT. The taxable year of the CLAT shall be the calendar year.

1.5 Date of Termination of Annuity Interest.

[Choose one of the following as appropriate: EITHER]

[EITHER: Option 1, life of single individual:]

For purposes of this Trust, the annuity interest distributed in accordance with the terms and conditions of Article I shall terminate on the death of ______[name of living individual]. On termination, the remaining Trust estate shall be distributed to the persons named and as set forth in Article II of this instrument.

[OR: Option 2, lives of two individuals:]

For purposes of this Trust, the annuity interest distributed in accordance with the terms and conditions of Article I shall terminate on the last to occur of the death of ______[name of living individual] and the death of ______[name of living individual]. On termination, the remaining Trust estate shall be distributed to the persons named and as set forth in Article II of this instrument.

[OR: Option 3, term of years not limited to 20 but not exceeding rule against

perpetuities:]

For purposes of this Trust, the annuity interest distributed in accordance with the terms and conditions of Article I shall terminate on ______[month, day (preferably December 31), year, not more than 90 years from date of creation OR the first to occur of (1) December 31, ______(year), or (2) the date twenty-one (21) years after the later of the death of (a) the Trustor and (b) ______(one or more named individuals living on date trust is created)]. On termination, the remaining Trust estate shall be distributed to the persons named and as set forth in Article II of this instrument.

ARTICLE II

DISTRIBUTION OF REMAINDER FOLLOWING TERMINATION OF ANNUITY INTEREST

2.1 Distribution of Remainder Interest. On termination of the annuity interest under Article I, Paragraph 1.5 of this instrument, the Trustee shall distribute all existing principal and income of the CLAT, other than any amount due to the Charitable Organizations under the provisions of Article I, as follows: ______[disposition of remainder, including whether disposition is outright or continues in Trust].

However, if any share of the CLAT becomes distributable to a minor under this Paragraph, the share shall immediately vest in the minor, but the Trustee shall retain possession of the minor's share during his or her minority. The Trustee shall use and expend so much of the income and principal of each minor's share as the Trustee deems necessary or desirable for the minor's proper care, support, maintenance, and education. Any income not so expended shall be added to principal. With respect to each share so retained, the Trustee shall have all the powers and discretion available with respect to this Trust generally.

ARTICLE III

PROHIBITION AGAINST CERTAIN PAYMENTS

3.1 Payments to Noncharities. No amount, other than the remainder interest payable on termination of the Annuity Interest in accordance with Article II of this instrument, may be paid to or for the use or benefit of any person other than a Charitable Organization.

3.2 Payment of Transfer Taxes Due from Trustor or Trustor's Estate. 3.2 No gift, legacy, succession, inheritance, estate, or generation-skipping transfer taxes assessed against assets transferred to this Trust, either because of inter vivos transfers by the Trustor to this Trust or because of the death of the Trustor, shall be paid out of assets held in this Trust. The Trustor agrees, on behalf of ______[himself, his heirs or herself, her heirs], legal representatives, successors, and assigns, to provide for payment of any such taxes from sources other than assets held in this Trust, and to indemnify and hold the Trustee harmless from any and all liability for payment of such taxes.

3.3 Spendthrift Protection. The interest of the remainder beneficiaries in income or principal under Article II of this instrument shall not be subject to claims of any creditor, of any spouse for alimony or support, or of others, nor to legal process, and shall not be voluntarily or involuntarily alienated or encumbered.

ARTICLE IV

VALUATION

4.1 In General. The net fair market value of assets transferred to the CLAT shall be determined on the basis of such market quotations, evidence, data, or other information that the Trustee, or any Independent Trustee, shall deem pertinent and reliable. Subject to limitations imposed under Article IV, Paragraph 4.2 of this instrument, all computations of net fair market value shall be made by the Trustee, whose decision, reached in good faith, shall be final and binding on all persons interested in the trust.

4.2 Responsibility for Valuation of Specific Assets. Notwithstanding any provision in this instrument to the contrary, the Trustee shall have the sole and exclusive authority to compute the net fair market value of assets transferred to the CLAT that consist of cash, cash equivalents, and Marketable Securities.

If assets transferred to the CLAT consist of assets other than cash, cash equivalents, and Marketable Securities ("Hard-to-Value Assets"), the Trustee may appoint an Independent Trustee in accordance with Article VII, Paragraph 7.4 of this instrument. The Independent Trustee shall have sole and exclusive authority to compute the net fair market value of Hard-to-Value Assets. For purposes of this Trust, "Marketable Securities" is defined in accordance with Internal Revenue Code section 731(c) [26 U.S.C.A. § 731(c)], and corresponding regulations.

If the Trustee does not appoint an Independent Trustee to compute the net fair market value of Hard-to-Value Assets, the Trustee shall secure a "qualified appraisal," as defined in Treasury Regulations section 1.170A-13(c)(3) [26 C.F.R. § 1.170A-13(c)(3)], from a "qualified appraiser," as defined in Treasury Regulations section 1.170A-13(c)(5) [26 C.F.R. § 1.170A-13(c)(5)], for purposes of determining the net fair market value of Hard-to-Value Assets.

4.3 Adjustments for Errors in Valuation. If the net fair market value of assets transferred to the CLAT is incorrectly determined, the Trustee shall pay to ______[the Charitable Organization or each Charitable Organization entitled to receive a portion of the Annuity Amount under Article I, Paragraph 1.1 of this instrument], in the case of an undervaluation, or shall collect from ______[the Charitable Organization or each Charitable Organization entitled to receive a portion of the Annuity Amount under Article I, Paragraph 1.1 of this instrument], in the case of an overvaluation, an amount equal to the difference between the Annuity Amount the Trustee should have paid if the correct value had been used and the Annuity Amount the Trustee actually paid to ______[the Charitable Organization or each Charitable Organization entitled to receive a portion of the Annuity Amount under Article I, Paragraph 1.1 of this instrument]. This adjustment is to be made within a reasonable time following final determination of the net fair market value for federal tax purposes.

ARTICLE V

IRREVOCABILITY OF TRUST AND LIMITED POWER OF AMENDMENT

5.1 Irrevocability of Trust. This Declaration of Trust is irrevocable and, except as provided in Article V, Paragraph 5.2 of this instrument, may not be altered or amended in any respect.

5.2 Power to Amend Trust to Ensure Tax-Exempt Status. The Trustee shall have the power, acting alone, to amend the Trust in any manner required for the sole purpose of ensuring that the CLAT qualifies and continues to qualify as a charitable lead annuity trust as described in Internal Revenue Code section 2522(c)(2)(B) or 2055(e)(2)(B) [26 U.S.C.A. §§ 2522(c)(2)(B) or 2055(e)(2)(B)].

ARTICLE VI

PROVISIONS CONCERNING TRUSTEES

6.1 Duties of Trustee. ______[If Paragraph 4.2 is included, add: Subject to limitations set forth in Article IV, Paragraph 4.2 of this instrument, the] Trustee shall hold all assets of the trust, shall compute the net fair market value of assets transferred to the trust, shall collect all income earned by the trust, shall make all distributions of the Annuity Amount in accordance with Article I of this instrument, and shall pay all expenses of the trust. The Trustee shall maintain or cause to be maintained appropriate records of the trust. Within a reasonable time following the end of each taxable year of the Trust, the Trustee shall prepare a statement showing how the property of the trust was invested and the receipts and disbursements of the trust for that taxable year, and shall furnish a copy of the statement to the Charitable Organization and to the then living remainder beneficiaries named in Article II of this instrument who would be entitled to receive a distribution from the Trust if the Annuity Interest terminated as of December 31 of the year for which the statement is prepared. If no written objection is delivered to the Trustee by any Charitable Organization or remainder beneficiaries entitled to receive the statement within ninety (90) days after receipt of the Trustee's account, the account shall be final and conclusive with respect to transactions disclosed in the account. After settlement of the account by agreement of the parties objecting to it, or on expiration of the ninety (90)-day period, the Trustee shall no longer be liable to any Trust beneficiary with respect to transactions disclosed in the account, except for the Trustee's intentional wrongdoing or fraud.