What is a charitable lead trust?

A charitable lead trust (CLT) is a type of trust that is used to make charitable donations. The trust allows for the trust’s assets to be donated to a designated charity or charities over a certain amount of time. Once the donation period is over, the remaining assets are transferred to the trust’s designated beneficiary. In Washington, a charitable lead trust works by utilizing grantor-retained annuity trusts (GRATs) or unitrusts (CRUTs). GRATs and CRUTs are two common types of trusts that allow an individual to either receive a fixed annuity or a variable annuity depending on the value of the trust’s assets. Depending on the type of trust, the grantor of the trust is able to make periodic payments to a designated charity for a set period of time, usually five to twenty years. Once the payment period is over the remaining assets are then transferred to the designated beneficiary. Because of their tax-advantaged nature, charitable lead trusts are becoming increasingly popular in Washington. Charitable lead trusts offer the grantor the opportunity to reduce their tax burden while also making a charitable donation. This type of trust provides a win-win situation for both the grantor and the charity, making it an attractive option for those looking to give back.

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What is a charitable lead trust?

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