Quick Notes: Charitable Lead Trusts and Estate Planning.

A quick tidbit on Charitable Lead Trusts (CLTs) as part of estate planning...

You can donate various kinds of property including cash, stocks, real estate and life insurance to charitable organizations of your choice.

One way to do this is to set up a Charitable Lead Trust (CLT). This is different from a Charitable Remainder Trust (CRTs) as discussed in this post.

A CLT is when cash or property is donated to an irrevocable trust.  The irrevocable trust makes a fixed payment (at least annually) to you (the donor) and/or other beneficiaries for her/his/their life or lives or a specified term of years.

The amount of the annual payment can be either (1) the same each year based on an fixed percentage of the initial value of the trust assets or (2) a variable based on a fixed percentage of the trust assets computed each year.

The donor or other non-charitable beneficiaries receive any  remaining trust assets at the end of the payment term.

So the biggest difference between a CLT and a CRT is this:

• In a CLT the donor or beneficiaries receive the trust assets at the end of the term.
• In a CRT the charity receive the trust assets at the end of the term.

A CLT is an irrevocable trust meaning that you give up all ownership and control over the property in the trust.

There are no contribution limits.

The level of complexity to set up a CLT is high.

There may be annual fees involved including trustee, investment, management, administration and tax preparation fees in maintaining the CLT.

For more information, consult with an estate planning attorney.