CFP

By Investopedia AAA

Charitable Transfers - Charitable Lead Trusts

Charitable Lead Trusts
With charitable lead trusts, the donor can donate an asset's income stream for a period of years to a charity instead of the remainder interest. The remainder interest can then pass to a private party under the direction of the grantor (i.e. grandchild, child, etc.).

UniTrusts
The charitable lead unitrust (CLUT) is a charitable annuity that allows the donor to give variable annual amounts to a charity for a limited period of time. The donor transfers property into the trust, then a fixed percentage payout is used to calculate the amount that is sent to the charity each year. Since the value of the investments within the trust will fluctuate from year-to-year, the payment is recalculated each year based on the new value of the trust.

Characteristics of a CLUT:

  • Variable annuity stream to a charity, fixed percentage.
  • Multiple deposits are allowed.
  • Effectively removes assets from the estate of the grantor.
  • At the end of the term, remainder interest is paid to a non-charitable beneficiary.
  • The donor receives an income tax deduction on FMV of the property transferred.

Annuity Trusts
A charitable lead annuity trust (CLAT) is a charitable annuity setup directly through an insurance company, or a similar organization, regularly engaged in the business of issuing annuity contracts. The donor makes an initial deposit to the CRAT and the charity receives the fixed annual income steam for a fixed number of years. At the end of the term of the trust, the donor's beneficiary will receive the remaining interest.

Characteristics of a CLAT:

  • Fixed annuity stream to a charity, fixed percentage.
  • Initial deposit is only allowed.
  • Effectively removes assets from the estate of the grantor.
  • At the end of the term, remainder interest is paid to a non-charitable beneficiary.
  • The donor receives an income tax deduction on FMV of the property transferred.
Charitable Gift Annuities

You May Also Like

Related Articles
  1. Several things factor into the salary of a financial advisor. Here's a look.
    Investing Basics

    How Much Does A Financial Advisor Earn?

  2. With a long list of risks, losses associated with foreign exchange trading may be greater than initially expected. Here are the top 5 forex risks to avoid.
    Economics

    Top 5 Forex Risks Traders Should Consider

  3. ISAs are financial instruments that allow students to raise funds to pay for their degrees by selling shares in their future earnings.
    Investing Basics

    Funding Higher Education With An ISA

  4. Top Ways to protect your purchases from credit card hackers or security breaches.
    Credit & Loans

    7 Ways To Protect Against Credit Card ...

  5. The Internal Revenue Service's new 2015 contribution limits for tax-deferred savings plans are higher; here's what you and your clients should know.
    Investing Basics

    New 2015 Contribution Limits: Advisors ...

Trading Center