charitable lead trust

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Charitable Lead Trust

An irrevocable trust into which the grantor deposits assets, with the income from the investment of these assets going to a designated charity for a certain period of time. After that time expires, the remainder of the assets and income are given to the trust's beneficiaries. A charitable lead trust allows the grantor to provide for his/her survivors after death while reducing to a minimum the estate tax because some of the assets were given to charity. See also: Charitable remainder trust.

charitable lead trust

A trust that pays an income to a charity for a specific length of time then leaves the remainder of the trust to designated beneficiaries, usually family members. The purpose of the charitable lead trust is to reduce taxes on the estate of the deceased while maintaining the family's control of the estate's assets. Compare charitable remainder trust.

Charitable lead trust.

A charitable lead trust (CLT) is an irrevocable trust that allows you to provide current income generated by assets in the trust to a qualifying charity. When the trust terminates after the period specified in the trust agreement, the trust beneficiaries you've named receive the assets.

Because of the delay in the transfer of assets to your beneficiaries, your gift is valued for tax purposes at its discounted present value, based on IRS tables. That amount may be less than the gift's market value, which affects the size of the charitable deduction you can claim.

Transferring assets in a CLT not only reduces the value of your estate for estate tax purposes but also eliminates potential capital gains tax on any increased value of the assets.

References in periodicals archive ?
Gifts in the form of cash, securities, real estate, life insurance, retirement plans, charitable gift annuities, charitable lead trusts, charitable remainder trusts, or transfers from an existing private foundation can be invested with care to provide grants for the causes that matter most to you.
Business owners with charitable inclinations often seek to reduce or, in some cases, eliminate estate taxes by bequeathing business interests to private foundations or charitable lead trusts. While such bequests can be effective for estate tax planning purposes, the rules for foundations and trusts make it difficult for a deceased owner's family to conduct business with those entities.
Charitable lead trusts also may be used to accelerate charitable deductions for a client while creating a future benefit for a beneficiary.
With charitable lead trusts, a portion of the trust income is donated to specified charities and then, after a certain period of time, the remainder of the trust is transferred to the beneficiaries, and any appreciation on the value of the assets is free of either gift or estate taxation.
For those individuals who are charitably inclined, charitable remainder trusts and charitable lead trusts are excellent planning tools and should be considered.
(Charitable lead trusts, which are not discussed in this article, reverse the transaction: The charity gets the income and the non-charitable beneficiary receives the remainder.)
(3,4) Split-interest trusts include three distinct types: charitable remainder trusts, charitable lead trusts, and pooled income funds.
Charitable trusts have been flat for some time but higher tax rates for income and capital gains on the wealthy might increase their attractiveness this year, said Barlow Mann, chief operating officer for The Sharpe Group, a consultancy in Memphis, Tenn., adding that Charitable Lead Trusts have been the fastest growing type of charitable trusts.
A less generous exclusion amount will act as a brake on such lifetime gifting techniques as charitable remainder trusts and charitable lead trusts.
With more than a decade of experience, Lawton has prepared traditional and complex wills, guardianship avoidance documents, and revocable and irrevocable trusts, including intentionally defective grantor trusts, grantor retained annuity trusts, life insurance trusts, charitable lead trusts, and charitable remainder trusts.
There are also many estate planning techniques that can enhance this opportunity such as grantor retained annuity trusts, family limited partnerships, charitable lead trusts, and sales to family trusts.

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