Planned Giving
What is a Charitable Lead Trust (CLT)?
The CLT is a powerful
way to make a future transfer of assets to your heirs at a
significantly reduced gift and estate tax cost, while also
supporting your charity with income. During a specified number
of years, the lives of one or more individuals, or a combination
of the two, all contributions are paid to the charity of your
choice. At the end of the trust term, the assets pass to beneficiaries
named by the donor. The donors choose the trustee.
 You
can fund a CLT with cash, publicly traded securities, closely-held
stock, income-producing real estate, partnership interests,
or a combination of the above. You can establish a CLT during
your lifetime, or as a testamentary trust through your will.
A lead trust may be structured to provide a fixed dollar contribution
annually (CLAT) or a fixed percentage contribution (CLUT).
Two Types
of Lead Trusts
There are two basic types of Lead Trusts: Non-Grantor and Grantor.
In a non-grantor
CLT, the most common type, the trust assets revert to
your children, grandchildren, or other heirs at the end of
the trust term. A non-grantor CLT provides a gift tax charitable
deduction and is useful in reducing the cost of intergenerational
wealth transfers.
In a grantor
CLT, the trust assets revert to you, rather than to your
heirs, at the end of the trust term. Donors creating grantor
CLTs receive a large charitable contribution income tax deduction.
Such a gift structure may be particularly useful if you wish
to make a multi-year pledge and accelerate future deductions
into the current year.
What Are
The Advantages of a Non-Grantor CLT?
For people who have significant assets, a CLT provides gift
and estate tax relief:
- You
receive a charitable gift tax deduction for the present
value of the annual trust payments to the charity. The amount
of this gift tax deduction is typically a large percentage
of the total assets contributed to a CLT, leaving only a
small portion of the gift amount subject to the gift tax.
- Because
the gift tax deduction and the amount subject to gift tax
is determined at the time the assets are contributed to
the CLT, any appreciation of the assets that takes place
during the term of the trust is not subject to additional
gift or estate tax. As a result, the amount that you ultimately
transfer to your heirs may be much larger than the amount
upon which the gift tax is imposed.
- None
of the income earned by a CLT is taxable to the grantor;
therefore, the grantor also does not receive a charitable
income tax deduction. In effect, this results in a reduction
of your taxable income over the trust term.
- The
assets you contribute to a CLT are removed from your taxable
estate, reducing your estate tax exposure.
- Unlike
most other gift planning arrangements, the benefits of a
CLT are immediate to the charity. Payments from a CLT can
be used to fund operating costs and other programs as well
as endowed funds.
How Do
I Create a CLT?
Donors establishing a CLT should be advised by an attorney who
is experienced in the area of charitable trusts and estate planning.
Please contact us by phone or
e-mail so that we can assist you or use our response/request
form.
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