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Jean Cochran, Newscaster
for Morning Edition |
You can fund a charitable lead trust with cash, publicly traded securities,
closely-held stock, income-producing real estate, partnership interests, or a
combination of the above. You can establish a CLT during your lifetime, or as a
testamentary trust through your will.
Two Types of Charitable Lead Trusts (CLT)
There are two basic types of Lead Trusts:
Non-Grantor and Grantor.
In a non-grantor CLT, the most common type, the trust assets revert to
your children, grandchildren, or other heirs at the end of the trust term. A
non-grantor CLT provides a gift tax charitable deduction and is useful in
reducing the cost of intergenerational wealth transfers.
In a grantor CLT, the trust assets revert to you, rather than to your
heirs, at the end of the trust term. Donors creating grantor CLTs receive a
large charitable contribution income tax deduction. Such a gift structure may be
particularly useful if you wish to make a multi-year pledge and accelerate
future deductions into the current year.
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Jim Packard, Announcer
& Ideas Network host |
What Are The Advantages of a Non-Grantor CLT?
For people who have significant assets, a CLT provides gift and estate tax relief:
- You receive a charitable gift tax deduction for the present value of the
annual trust payments to your public radio station. The amount of this gift tax
deduction is typically a large percentage of the total assets contributed to a
CLT, leaving only a small portion of the gift amount subject to the gift
tax.
- Because the gift tax deduction and the amount subject to gift tax is
determined at the time the assets are contributed to the CLT, any appreciation
of the assets that takes place during the term of the trust is not subject to
additional gift or estate tax. As a result, the amount that you ultimately
transfer to your heirs may be much larger than the amount upon which the gift
tax is imposed.
- None of the income earned by a CLT is taxable to the grantor; therefore, the
grantor also does not receive a charitable income tax deduction. In effect, this
results in a reduction of your taxable income over the trust term.
- The assets you contribute to a CLT are removed from your taxable estate,
reducing your estate tax exposure.
- Unlike most other gift planning arrangements, the benefits of a CLT are
immediate to your station. Payments from a CLT can be used to fund operating
costs, development of new programs as well as endowed funds.
How Do I Create a CLT?
Donors establishing a CLT should be advised by an attorney who is experienced in
the area of charitable trusts and estate planning. Please contact us by phone or e-mail so that we can assist
you or use our response/request form.
Here's an example of a Charitable Lead Trust with Phil & Alicia
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