Stretching Family Control (CLT-CRT)(LI)


A private foundation can extend control over a charitable lead or charitable remainder trust.


other individuals) for a stated number of years (or for the private beneficiary’s life). After this period, any assets remaining in the trust pass to one or more charities. CRTs are primarily used to provide the donor with lifetime cash flowwhile obtaining a current charitable deduction from income tax. The downside of CLTs and CRTs is that they have a limited lifespan. Although their trust instruments can be, and often are, drafted to allow the donor or the donor’s family to control which charities will ultimately receive a charitable distribution from the trusts, that control is finite. In the case of a CLT, the control is limited to the term of the trust, which is usually 30 years or less. With a CRT, control is enjoyed only during a set term, typically the lifetime of the donor (or other private beneficiary). Family control over CLT or CRT funds for charity does not have to end, however, if a CLT or CRT is combined with a private foundation. The trust instruments may be drafted to permit or require charitable distributions to the donor’s private foundation so that the donor or the family can continue to control the charitable use of those funds for years to come. A CLT or a CRT can be used to fund a private foundation immediately, even if the term of the trust will not end for many years— there’s no need to wait.

any families have either a charitable remainder trust (CRT) or a charitable lead trust (CLT). Although these

charitable vehicles offer significant advantages, providing tax savings and distributions back to the family while benefitting charities, they do have one inherent drawback: They cannot carry out a family’s charitable intentions beyond their limited terms. However, when a private foundation is established alongside either a CRT or CLT, the donor and the donor’s family can receive all the usual benefits of these trusts while retaining the family’s charitable control—potentially forever. CHARITABLE LEAD TRUSTS CLTs are primarily used to make charitable donations while also creating the opportunity for tax-free gifts to the family. In a CLT, the donor contributes assets to a trust that makes annual distributions to 501(c)(3) nonprofit organizations for a stated number of years. After this period of time, any remaining assets in the trust pass to the donor’s family free of gift tax. CHARITABLE REMAINDER TRUSTS In a CRT, the charitable and family interests are reversed: The donor contributes assets to a trust that makes annual distributions to the donor (or Let’s take a closer look at charitable lead and charitable remainder trusts.

The downside of CLTs and CRTs is that they have a limited lifespan.

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