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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