Charitable Lead Trust
A charitable lead trust is a taxable trust and irrevocable agreement where a donor transfers assets to a trust that creates an income distribution (lead interest) for charity.
What Is A Charitable Lead Trust?
Put simply, you dedicate assets to generate a steady stream of income – a “lead” interest – for the causes you care about. For a set number of years, or even for the lifetime of designated individuals, your chosen charities receive ongoing support, empowering their mission. At the end of the measuring term, whatever remains in the trust is distributed back to the donor or heirs.
We’re happy to help you determine if a charitable lead trust is right for you.
How Charitable Lead Trusts Work For You
From taxes to your legacy, a charitable lead trust offers several benefits.
Goal Flexibility
- Grantor CLT provides an income tax deduction
- Non-grantor CLT provides a transfer tax deduction (estate or gift)
- A super CLT provides income and transfer tax deduction
Gift & Estate Tax Planning
A non-grantor charitable lead trust lets you give to charity for the defined measuring term. The gift or estate tax deduction created from the contribution will help pass assets to the heirs at lower transfer costs.
Charitable Impact During Your Lifetime
Unlike a charitable remainder trust, the charities receive an income stream throughout the trust term, allowing donors to see their charitable impact during their lifetime.
Powerful Planning Tool
This irrevocable trust arrangement allows you to make contributions to your chosen charities while generating tax benefits across income, gift, and/or estate transfers.
Income Tax Deduction
Charitable lead trusts are used by individuals who desire an income tax deduction to offset current year taxable income or who desire to reduce or eliminate federal estate and gift taxes from transferring wealth to heirs.
Maintain Advisory Privileges
When a donor establishes a Grantor CLT that directs its distributions into a DAF, the grantor can also serve as the fund’s advisor. This allows them to guide how future grants are recommended to charities, extending their philanthropic influence beyond the CLT while retaining the tax and estate planning benefits of the trust.
What You Can Do With A Charitable Lead Trust
Explore our in-depth resources on charitable lead trusts.
Benefit Charity, Reduce Taxes, And Transfer Assets To Heirs
Although less familiar than charitable remainder trusts, charitable lead trusts can meet many of a donor’s tax, financial, and non-financial goals.
The Charitable Lead Trust Handbook
Feeling overwhelmed? Our charitable lead trust handbook details insightful information for you as a donor or advisor.
Three Common Charitable Lead Trust Formats
There are three types of CLT formats that are commonly used: the non-grantor CLT, grantor trust, and the super CLT.
Ideal Donor Profile
Significant Income Event
A charitable lead trust is often used by individuals who have had a significant income event and want to donate cash, publicly traded stocks, real estate, and other complex assets.
Anticipated High Taxes
If you anticipate your estate and gift taxes will be high when transferring your wealth on to your heirs, a charitable lead trust could be a good way to offset that.
Charitable Mindset
If you want to provide charitable organizations with an income stream throughout the trust term, a charitable lead trust may be right for you.
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Related Resources
Learn more about charitable remainder trusts and how Ren can help support your philanthropic goals.
