What is a charitable lead trust?
A charitable lead trust (CLT) is a type of trust that allows a donor to donate money, property, or other assets to a charity and then bequeath the remainder of the trust to another individual. The donor contributes to the trust, and the charity receives income from the trust for a designated amount of time, often a specified number of years. The amount gifted to the charity is subject to the existing inheritance laws in California. Once the trust term expires, the remainder of the trust is given to the designated beneficiary chosen by the donor. A CLT is an effective way for donors to reduce the impact of estate and inheritance taxes, since the remainder goes to the designated beneficiary after the income period is completed. The trust also can provide a way to ensure that the donation to a charity is provided over a longer period of time. Additionally, the trustee can invest the assets within the trust, allowing for the principal to grow over time. This can be beneficial to the charity, since the amount of the donation increases over time. The CLT is an effective tool for donors in California wishing to make significant charitable contributions while also providing for heirs or other beneficiaries. It can provide a significant benefit to both the charity receiving the initial donation, as well as the beneficiary receiving the remainder of the trust at the end of the term.
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