DEFINITION of 'Charitable Lead Trust'

A trust designed to reduce beneficiaries' taxable income by first donating a portion of the trust's income to charities and then, after a specified period of time, transferring the remainder of the trust to the beneficiaries.

BREAKING DOWN 'Charitable Lead Trust'

The whole idea of a charitable lead trust is to reduce taxes upon the estate left by the deceased. This is done by donating to charities from the estate until all taxes are reduced. Once this is accomplished, the estate is then transferred to the beneficiaries, who typically will face lower taxes.

Many different organizations offer information regarding the set-up of these types of trusts. Examples are universities, colleges, and non-profit societies.

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RELATED FAQS
  1. Do beneficiaries of a trust pay taxes?

    Beneficiaries of a trust typically pay taxes on distributions from the trust's income, but not on distributions from the ... Read Answer >>
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