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Charitable Remainder & Charitable Lead Trusts

Irvine Probate Law > Trust Administration > Charitable Remainder & Charitable Lead Trusts

This type of trust is technically a Charitable Uni-Trust, but is more commonly known as a Charitable Remainder Trust (CRT).

Charities help those who are not as fortunate, and fill a wide variety of niches. Domestic violence… youths… disease… homes for the poor. Endangered species even have their own charities. And believe it or not, charities serve another purpose: they help wealthy Americans reduce their tax bill.

 

A certified charitable lead trust (CLT)-qualified in the sense that its charitable present part is deductible for some or all income, present, and estate tax functions is, in a lot of respects, the conceptual reverse of the charitable remainder trust.

 

The charitable lead trust method involves the production of a trust that will make its preliminary payments to charity for a defined regard to years, or for a life or lives in being, and which, at the termination of the specified payment duration, will disperse its remaining properties to noncharitable recipients (e.g., the donors, members of the donors’ household, or other individuals).

 

Thus, the charity has the preliminary, or “lead” interest in the trust, while the noncharitable recipients will take the remainder. There are two sort of certified charitable lead trusts: the charitable lead annuity trust (CLAT), and the charitable lead unitrust (CLUT). A CLAT is an irreversible trust that might be developed by a donor either intervivos, or upon death, and which specifies that an annual fixed dollar quantity should be paid at least each year to charity until the termination of the defined term, at that point the trust properties pass to, or in trust, for the noncharitable receivers. Unlike the charitable rest annuity trust, the annuity quantity of a CLAT need not be at least 5% of the preliminary net fair market value of the possessions transferred to the trust.

 

A CLUT is an irrevocable trust that may be developed by the donor either intervivos, or upon death, and which defines that a yearly “unitrust quantity” must be paid at least every year to charity till the termination of the specified term, at that point the trust assets pass to or in trust for the noncharitable recipients. The annual “unitrust amount” need to amount to a specified percentage of the net reasonable market value of the CLUT’s properties, as revalued each year. Unlike the charitable remainder unitrust, the defined portion does not need to be at least 5% of the net reasonable market value of the trust possessions.

 

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