Charitable Lead Trusts

Legal and Financial Considerations:
Charitable Lead Trusts are irrevocable. Once established, the terms cannot be changed and control of the assets transferred to the trust is relinquished.
The minimum recommended funding amount for a Charitable Lead Trust is typically $250,000 due to setup and administration costs.
Two main types exist: Charitable Lead Annuity Trusts (CLATs) pay a fixed dollar amount annually, while Charitable Lead Unitrusts (CLUTs) pay a fixed percentage of the trust’s value as revalued annually.
Trust administration requires ongoing management, annual tax filings, and professional oversight.
The trust term can be for a specific number of years (typically 10-20) or for the lifetime of the donor.

Tax Implications:
Income tax treatment varies depending on whether the trust is structured as a grantor or non-grantor trust.
With a grantor Charitable Lead Trust, you may receive an immediate income tax deduction for the present value of the payments to be made to charity, but you will be taxed on the trust’s income.
With a non-grantor Charitable Lead Trust, you do not receive an income tax deduction, but you are not taxed on the trust’s income.
Charitable Lead Trusts can be particularly effective in reducing estate and gift taxes when transferring assets to family members.
The value of assets eventually transferred to heirs is “frozen” for gift and estate tax purposes at the time the trust is created, allowing future appreciation to pass tax-free.

Getting Started:
We strongly recommend consulting with your own estate planning attorney, tax advisor, and financial planner before establishing a Charitable Lead Trust.

Charitable Lead Trusts are complex arrangements best suited for donors with substantial assets and specific family wealth transfer objectives.

Hospice of the Northwest Foundation can provide general information but cannot offer legal or tax advice specific to your situation.
Our staff can work with your advisors to help structure a Charitable Lead Trust that meets both your financial goals and charitable intentions.

For more information about Charitable Lead Trusts and how they might benefit you, your heirs, and Hospice of the Northwest Foundation, please contact us at (360) 814-5702 or foundation@hospicenw.org.

This information is provided for educational purposes only and is not intended as legal, tax, or financial advice. Please consult with qualified professional advisors regarding all financial, tax, and legal matters.