Charitable Lead Trusts

Charitable Lead Trusts

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Charitable Lead Trusts

Charitable Lead Trusts definition:  (CLT) Charitable lead trusts are deductible; therefore reducing income and estate taxes. They are not tax-exempt.  A charitable organization receives annual income from the trust, and the grantor receives an income tax deduction for the amount donated to charity. The term of the trust may be for a fixed number of years or a person’s lifetime.  The income from the trust is effectively removed from the taxable estate.  When the trust expires, the remaining amount in the trust is transferred to a beneficiary and is subject to gift or estate taxes. When funding the trust, highly appreciated assets may be transferred to a charitable lead trust without paying capital gains tax. For example, real estate or stock purchased at a low basis which has appreciated in value can be sold or transferred to the charitable lead trust without paying capital gains tax.

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