Charitable Lead Trust 101

Photo by Leo Reynolds

What is a charitable lead trust?
A charitable lead trust is designed to reduce its beneficiaries taxable income. Some view it as opposite of a charitable remainder trust. With charitable lead trusts, the donor transfers their property to the trust, which pays a percentage of the its value to the nonprofit for a pre-determined number of years and then the remaining assets (plus any growth) are passed on to the beneficiaries.

Why are these trusts appealing to donors?
These trusts are a win-win for both donors and nonprofits. Nonprofits receive a planned gift, and donors receive tax benefits. There is not a income tax deduction when a charitable lead trust is created, plus when the beneficiaries receive the remaining assets, their gift tax/estate tax is significantly reduced and they receive the growth estate tax/gift tax free.

Need more information?

To help you understand how it works, click here for an example.

To learn more about the nuts and bolts, and history of the charitable lead trust click here and here.

This article will help you in “Choosing the Best Charitable Lead Trust to Meet a Client’s Needs.”

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