Charitable Lead Trust

A Charitable Lead Trust is considered the reverse of a Charitable Remainder Trust because the charity receives the income stream for a period of years and the heirs receive the principal. With a lifetime Charitable Lead Trust, an individual or couple donates $2 million to a trust. The charity receives annual payments from the trust in an amount set forth in the trust agreement. At death or at the end of a predetermined time frame, the heirs receive the remaining principal from the trust. This type of trust may appeal to individuals with unusually high incomes for a given year or period of time, because a current income tax deduction may be available for the value of the charity's income interest, depending on the type of trust created.

Life insurance can also be used to pass on the entire value of the assets to heirs or be used by the charity to replace the income it had earned prior to the termination of the trust.

Note: This information should not be used as a basis for legal and/or tax advice. In any specific case, the parties involved should seek the guidance and advice of their own legal and tax counsel.