At trust's termination, principal passes to charity. Income payments may be made quarterly, semiannually or annually. The payout is based on a fixed percentage of the trust assets, as revalued annually. At the termination of the trust, the remaining assets go to the charity. The charitable lead unitrust functions in the reverse manner.
Many donors use the lead trust to ultimately transfer wealth to children and grandchildren.
Because of a peculiarity in the tax laws, lead trusts can help you transfer sizable assets to heirs with the possibility of less shrinkage from taxes than if you give the assets to them outright. We'll explain how that works a little later. With all the possibilities, unitrusts can play an important role in any financial or estate plan. To say the charitable remainder unitrust is versatile is perhaps to be guilty of understatement. Naturally, there are some limitations under the law.