Charitable Lead Trusts
Lead the way for charity and family
If you are looking for a way to pass on some of your assets to your family while reducing or eliminating gift or estate taxes, a Charitable Lead Trust (CLT) can be an excellent option. By investing cash or appreciated assets in a CLT, you will support Children’s Health and transfer the remainder to a loved one in the future.
How it works
You transfer cash or appreciated assets to a trust and receive an immediate tax deduction.
The funds are invested, and Children's Medical Center Foundation receives income from the trust as a beneficiary for a pre-determined number of years.
At the term of the trust, your loved one receives the remaining trust assets, including any growth in the invested funds.
Benefits of a charitable lead trust
Receive an income, gift and/or estate tax charitable deduction
Pass inheritance on to family at a reduced or zero cost
Make life better for children during your lifetime
Example: CLT funded with stock
Betty is a business owner facing a large estate tax, is charitably inclined, is grateful for the care her child received at Children's Health and wants to support the organization during her lifetime. She creates a 10-year-term CLT, makes a donation of $1,000,000 using highly appreciated stock, avoids capital gains tax and receives an immediate charitable tax deduction. The trust makes yearly payments of $50,000 to Children’s Medical Center Foundation while invested to grow over time. Betty elects to have the remainder of the trust benefit her son, Carl. She may also elect to reinvest the funds in a new CLT at the term of the trust so the funds continue to grow and can later benefit her family.
Our team is here to help
If you have questions or would like to review a custom proposal, please reach out to 
GiftPlanning@childrens.com or 214-456-8360.
Important Considerations
Before pursuing this giving method, donors should be aware of the following:
The CLT is the inverse of a CRT: In a Charitable Remainder Trust, income goes to the donor first, then the remainder to charity. In a Charitable Lead Trust, income goes to charity first, then the remainder to heirs. This structure is particularly well-suited for donors who want to pass wealth to family at reduced estate or gift tax cost.
CLTs are complex and require professional guidance: The setup, management, and tax reporting for a CLT requires an estate attorney, financial advisor, and often a professional trustee. This is not a do-it-yourself vehicle.
The CLT is irrevocable: Once established, a CLT cannot be dissolved or amended without extraordinary court intervention. The donor permanently transfers assets into the trust.
This information is not intended as tax, legal, or financial advice. Consult your personal financial advisor for information specific to your situation.
Key Rules and Guidelines
The following IRS rules, limits, and requirements apply to this giving method:
Grantor vs. non-grantor CLT: In a grantor CLT, the donor receives an upfront charitable income tax deduction but must report all trust income each year. In a non-grantor CLT, no income tax deduction is available, as the trust income is taxed to the trust. Estate and gift tax savings are the primary benefit for most non-grantor CLTs.
Payout rate must meet IRS requirements: For a CLT to qualify as a charitable lead trust, it must be structured as either a Charitable Lead Annuity Trust (CLAT) — paying a fixed dollar amount annually — or a Charitable Lead Unitrust (CLUT) — paying a fixed percentage of trust value annually.
Capital gains and appreciated assets: Funding a CLT with appreciated assets may generate capital gains at the trust level when the assets are sold, depending on the trust structure. Donors should work with their tax advisor to structure the contribution appropriately.
Rules and limits referenced above reflect current law. Tax law is subject to change. Please consult a qualified tax or legal professional for advice specific to your situation.
Interested in learning more?
Reach out to our Legacy & Gift Planning team today to learn about ways to make a tax-smart gift.
Let us know
If you have been so generous as to already include Children’s Medical Center Foundation in your plans, please complete our recognition form to join our Bradford Society.
