Charitable Lead Annuity Trusts (CLATs) are irrevocable split interest trusts that pay a fixed annuity amount to a charity either for a fixed term or for the grantor’s lifetime. Non-charitable beneficiaries then receive the remainder free of estate or gift tax at the end of the annuity period. One beneficial estate planning aspectof a CLAT is that it can own life insurance. The grantor should fund the trust with a fully funded life insurance policy instead of having the CLAT purchase the policy.
For more information on CLATs, see Alan R. Jahde, J.D., LL.M, Can a Charitable Lead Annuity Trust Own Life Insurance?, WealthCounsel, Dec. 20, 2011.
Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.
