Day Pitney remains committed to providing quality legal counsel, while protecting our clients and employees, and transforming our communities into more just, equal and equitable spaces. For more information, please visit our COVID-19 Resource Center | Racial Justice and Equity Task Force.
Transferring wealth to loved ones while achieving charitable goals and minimizing taxes may sound like a lot, but this balancing act can be successfully and efficiently accomplished using a charitable lead trust (CLT). Perhaps one of the most famous CLTs is the one under the will of Jacqueline Kennedy Onassis. It provided annual gifts to charity for 24 years after her death, with the remaining property passing to her grandchildren. Although this CLT was only funded if her children "disclaimed" (refused to accept) the inheritance otherwise provided to them (they did not disclaim), Jackie O. recognized the value of including a CLT in her estate plan and relied on her children to make the ultimate decision of whether the CLT should be implemented after her death.
A CLT is an irrevocable trust established during the donor's lifetime or at the donor's death that provides a stream of income to one or more charities for a period of time measured by a term of years, the lifetime of certain persons or a combination of both. Once this period expires, remaining trust property (and any appreciation above the IRS assumed rate of return, currently 1.6 percent) is distributed to non-charitable beneficiaries. The income stream to charity can be structured as an annuity (a fixed amount or percentage of the initial trust property) or as a unitrust (distributions based on the annual fair market value of the trust property).
Jackie O. included a CLT in her will to support her charitable passions and ultimately provide for her family. With a testamentary CLT, an estate tax charitable deduction is available to the donor's estate for the value of the interest passing to charity. For lifetime CLTs, income and gift tax charitable deductions may be available. In addition, with a lifetime CLT, the donor has the opportunity to witness the charity's use of the contributions from the CLT, which can be a rewarding benefit.
Although Jackie O.'s CLT was never implemented, many other CLTs have been put in place to achieve many goals, including to:
For all the reasons discussed above, the use of a CLT should be explored by any charitably inclined donor; it is not a technique reserved for First Ladies and fashion icons.
An article from Day Pitney's Fall 2016 Nonprofit Newsletter
An article from Day Pitney's Fall 2016 Nonprofit Newsletter
An article from Day Pitney's Fall 2016 Nonprofit Newsletter
An article from Day Pitney's Fall 2016 Nonprofit Newsletter
This website may use cookies, pixel tags and other passive tracking technologies, including Google Analytics, to improve functionality and performance. For more information, see our Privacy Policy. By using our website, you are consenting to our use of these tracking technologies. You can alter the configuration of your browser to refuse to accept cookies, but if you do so, it is possible that some areas of web sites that use cookies will not function properly when you view them. To learn more about how to delete and manage cookies, refer to the support instructions for each browser (e.g., see AllAboutCookies.org). You may locate Google Analytics' currently available opt-outs for the web here.
This website may use cookies, pixel tags and other passive tracking technologies, including Google Analytics, to improve functionality and performance. For more information, see our Privacy Policy. By using our website, you are consenting to our use of these tracking technologies. You can alter the configuration of your browser to refuse to accept cookies, but if you do so, it is possible that some areas of web sites that use cookies will not function properly when you view them. To learn more about how to delete and manage cookies, refer to the support instructions for each browser (e.g., see AllAboutCookies.org). You may locate Google Analytics' currently available opt-outs for the web here.