CFP

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.


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