Lead Trust Allows For 100% Income Deduction For Charity

Typically, a charitable lead trusts isfunded with securities. Securities are easier to manage than other assets.However, some charitable lead trusts have limited partnership interests.



Inorder to have a limited partnership interest in a charitable lead trust thereshould be no debt in the partnership. Additionally, the charitable trust shouldbe shielded from any active business to avoid an unrelated business taxableincome. Moreover, there must be a general partner in strict compliance with allof the rules. These three requirements are common for several tax rules.


Iffor some reason a partnership incurred debt, the debt could warrant anunrelated business taxable income trust. The issue with having an unrelatedbusiness taxable income trust is that the trust does not receive a fulldeduction for charity contributions. By avoiding that type of trust and using alead trust, donors can take advantage of the 100% deduction when income isgiven to charity.

See Charitable Lead Trust, Utchinson Research Center, Jul. 28, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.