Charitable Lead Trusts

Charitable Lead Trusts

Article posted in Charitable Lead Trust on 26 June 2003| comments
audience: Partnership for Philanthropic Planning, National Publication | last updated: 16 September 2012


In this edition of Gift Planner's Digest, Robert Lew and Darryl Ott, Esq. provide a concise overview of the variety of charitable lead trusts and provide eight creative case studies that illustrate their application.

Case Study Five: Before I Die

(Intervivos, CLAT, and Non-Grantor)

Nice, age 53, has decided that each of his four children should receive a reasonable inheritance at a predetermined age. He wants his children to receive their inheritance while they are young enough to enjoy it, and he wants to limit the amount of money each of his children is to be given. Since he is very wealthy, he has decided that $1,500,000 is to be given to each child when they reach age 45.

Mr. Nice has a favorite charity. In fact, the charity was started by a $2,000,000 gift of appreciated stock that Mr. Nice gave to this charity just last year. He has expressed interest in providing this charity with annual gifts.

Mr. Nice decides to establish four $1,500,000 charitable lead annuity trusts designed to pay a lead interest of 6% to his charity. The four CLATs will terminate in 16, 18, 22 and 25 years as each child reaches age 45. If his two basic assumptions come true, that the CLATs will realize a total return, on the average of 9% per annum, and that inflation will average 3% per year, each of his children will receive an amount equal to the present value of $1,500,000. His charities will receive a total of nearly $7,300,000 from the four CLATs over the respective periods of the trusts.

In addition, in an effort to improve his children's' abilities to work with advisors, he has appointed each child to act as co-trustee of their respective lead trust.

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