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Advantages of a Charitable Lead Annuity Trust

Charitable Lead Annuity Trust CLAT

charitable lead annuity trust, aka a CLAT, is a type of charitable lead trust which then makes fixed payments to supporting the Mission during its lifetime. The payment is in the form of an annuity. At the end of the CLAT’s term, any remaining assets in the trust are passed to beneficiaries or revert to the donor. If the grantor wishes, the trust can also make payments to selected funds from which additional charitable gifts can be distributed according to the grantor or their family’s directions.

Advantages of CLAT arrangements

  • Donor families can receive a substantial charitable deduction, thus preserving their wealth.
  • The donor can claim immediate income tax charitable deduction in the case of a grantor CLAT
  • The owner of a non-grantor CLAT is due for a gift tax charitable deduction determined by the present value of the interest received by supporting the Mission of San Juan Capistrano.

A CLAT can be further categorized as a non-grantor or grantor CLAT, depending on its structure. A grantor CLAT is structured such that the donor controls the assets in the trust and gets an immediate income tax deduction for the present value of the annuity stream going to supporting the Mission.

On the other hand, a non-grantor CLAT doesn’t provide immediate income tax deduction because it belongs to the trust, not the donor. However, at the end of the CLAT term, the donor can claim charitable deductions based on the value of assets the trust pays them.

Planning to use a CLAT in your estate plan?

Charitable giving is a fantastic estate planning tool; these charitable gift opportunities allow you to donate to the Mission of San Juan Capistrano, reduce your tax burdens and receive dependable income for life.