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Give Without Disinheriting Children
The Income Inheritance Trust

A Simple Concept:

Convert a portion of your children's inheritance
from a lump sum into a stream of income.

This is accomplished by inserting a provision in your estate plan that transfers a portion of your estate into a special Income Inheritance Trust* at death. Over 15 years, the trust pays your children a fixed annual amount equal to 7% of the value of the estate placed in the trust. The total income received by the children, from the trust, equals 100% of the amount initially placed in the trust—thereby fully converting the lump sum into income.

How Your Children Benefit
  • The children receive most of their inheritance immediately.
  • The total income received by the children equals 100% of the value of the estate given to the trust.
  • Much of the children's income is received free of income tax.
  • The total inheritance received —the outright portion plus the income payments—equals 100% of the inheritance the children would have received had you not made the gift.
How Parents Benefit
  • Design an estate plan that best reflects your values and goals.
  • You retain lifetime control of your assets.
  • You can address any concerns you may have about leaving your children's ability to handle a large lump sum inheritance.
  • This plan creates the leverage to make a gift that you may never have thought possible.
A Case Study

Mr. and Mrs. Hobbs Add the "I.I.T." Factor to Their Estate Plan
Mr. and Mrs. Hobbs have a $5 million estate. They would like to create charitable legacy, but are concerned that a gift during life might jeopardize their financial security, and that a gift from their estate will significantly reduce the inheritance they want to give their children.

The "I.I.T." Factor Solution: Under the terms of the Hobbs' estate plan, a 10% share of their estate ($500,000) will be transferred into a Income Inheritance Trust, and $4,500,000 is given to the children outright. The trust will pay the children $35,000 each year (7% of the initial value of the trust, divided equally between them), for a period of 15 years. Over that time, the children will receive $525,000 of total income, or slightly more than the amount given to the Trust. Thus, the children receive a total inheritance of $5,025,000

How CMC Benefits: At the end of 15 years, the trust ends and remaining trust assets come to the College to be used for a purpose that the Hobbs have designated.

*The Income Inheritance Trust is a creative application of a standard, term-of-years, charitable remainder annuity trust.


Copyright © Claremont McKenna College, All rights reserved.

The information in this Web site is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income tax include federal taxes only. Individual state taxes and/or state law may impact your results.
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