Charitable Lead Trust (CLT)
A charitable lead trust pays income to charity for a term of years, with remainder passing to non-charitable beneficiaries (typically family), providing gift/estate tax benefits on the remainder interest.
Exam Tip
CLT = charity LEADS (gets income first). Family gets remainder. Opposite of CRT. Good for passing wealth to heirs at reduced gift/estate tax.
What is a Charitable Lead Trust?
A CLT is the OPPOSITE of a CRT - charity gets income FIRST, family gets remainder.
How It Works
- Grantor transfers assets to trust
- Charity receives annuity/unitrust payments for term
- Remainder passes to family at end of term
- Gift/estate tax deduction for present value of charity's interest
Types
| Type | Grantor Taxation |
|---|---|
| Grantor CLT | Income taxed to grantor |
| Non-Grantor CLT | Trust pays income tax |
Tax Benefits
- Reduces taxable estate
- Gift tax on discounted remainder value
- Good for low interest rate environments
Study This Term In
Related Terms
Charitable Remainder Trust (CRT)
A charitable remainder trust provides income to the donor or other beneficiaries for life or a term, with the remainder passing to charity, offering an immediate income tax deduction and avoiding capital gains on contributed assets.
Grantor Trust
A grantor trust is a trust where the creator (grantor) retains certain powers or interests that cause the trust income to be taxed to the grantor personally rather than to the trust, making the trust a "disregarded entity" for income tax purposes under IRC Sections 671-679.
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