A charitable lead trust (CLT) pays annuities to one or more charities of your choice for a specified term or for life. At the end of the term, the remaining assets will pass to any non-charitable beneficiaries. During the term, if the trust generates higher total returns, any excess growth will pass to your non-charitable beneficiaries free of gift tax. This benefit is determined in part by the interest rates at the time of trust creation. Low interest rates will produce a greater tax deduction and reduction in the gift tax. On the other hand, charitable deduction amounts are determined based on the size of charitable payments, the length of charitable term, and the IRS prescribed rates for calculating the present value of charitable payments. A CLT represents an opportunity for significant estate and gift tax savings.
See Albert W. Gortz, George D. Karibjanian, David Pratt, Mitchell M. Gaswirth, & Andrew M. Katzenstein, Charitable Lead Trusts Can Save Transfer Taxes, National Law Review, July 31, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
