Charitable Lead Trust (CLT)

Charitable lead trusts (CLT) are often viewed as the opposite of a charitable remainder trust. A donor transfers property to the trust, which pays a percentage of the value of the trust assets, usually for a term of years, to the the charity or charities specified in the trust document. At the end of the trust term, the remaining assets in the trust and any growth it has realized are passed to the beneficiaries you designate. (see diagram below) (Sometimes the donor will even make themselves the remainder beneficiary.)

CLTs can either pay out an "Annuity" amount or a "Unitrust" amount and may either be taxed within the trust or taxed to the donor. There are many other variations on Charitable Lead Trusts and you should speak with a competent advisor if you wish to use a Charitable Lead Trust in your planning.

Depending on how your Charitable Lead Trust is drafted, you may have an income tax deduction, your gift or estate tax may be discounted and any growth may be passed to your heirs gift and estate tax free. How the CLT is drafted will depend on the circumstances of your estate and the goals you wish to achieve.

Is this right for me?

Do I have genuine charitable intent? - yes

Do I want to retain the principal of a gift for myself OR Do I want to pass on wealth to loved ones? - yes

Do I want to benefit a charity now with an income stream? - yes

Can I afford to give enough that the income stream will meet my charitable intent?

If your answers agree with or are similar to the above answers, a CLT may be an appropriate planning tool for your structured giving. You should always talk with a competent advisor when considering a Charitable Lead Trust.

How a Charitable Lead Trust Works

Charitable Lead Trusts come in many different variations. We will not attempt to educate you on all of the possible variations and their advantages and disadvantages here. For further information please contact a knowledgeable advisor.

Charitable Lead Trusts are generally used by moderate to large estates who wish to do structured gift planning. The Charitable Lead Trust is most frequently used in conjunction with other planning tools such as Irrevocable Life Insurance Trusts, Private Foundations or alternate foundations like Donor Advised Funds and Support Organizations.

Assets Used With This Tool (Charitable Lead Trust [CLT])