Families who wish to give to charity while minimizing gift and estate taxes should consider a charitable lead trust (CLT). These trusts are most effective in a low-interest-rate environment, so conditions for taking advantage of a CLT are still favorable. Although interest rates have crept up recently, they remain low.
Two Types of CLTs
A CLT provides a regular income stream to one or more charities during the trust term, after which the remaining assets pass to your children or other noncharitable beneficiaries. If your beneficiaries are in a position to wait for several years (or even decades) before receiving their inheritance, a CLT may be an attractive planning tool. That’s because the charity’s upfront interest in the trust dramatically reduces the value of your beneficiaries’ interest for gift or estate tax purposes. There are two types of CLTs: