Charitable Lead Trust

You create a Charitable Lead Trust (CLAT) by transferring cash or other assets to an irrevocable trust. Jackson Recovery Centers receives fixed annuity (principal and interest) payments from the trust for the number of years you specify. At the end of the term, assets in the trust are transferred to the non-charitable remainder-person (or persons) you specified when you set up the trust. Usually, this person is a child or grandchild but it can be anyone, even someone who is not related to you.

You can set up a CLAT during your lifetime or at your death. Both corporations and individuals may establish lead trusts.

Advantages of CLAT

You can set up a CLAT so that you will receive an immediate and sizeable income tax deduction. In the second and following years, you must report the income earned by the trust even though it is actually paid to Jackson Recovery Centers in the form of an annuity. One advantage of doing this is the acceleration of the deduction. For example, suppose you have just won the lottery, closed an incredibly large case, or sold a very highly appreciated asset. It’s good planning to have a very high deduction in a higher bracket year even if you have to report that income in lower bracket years. You are spreading out the income (and the tax) over many years. 

Benefits to Family Members

Another advantage of the CLAT is that it allows a “discounted” gift to family members. Under the present law, the value of a gift is determined at the time the gift is made. The family member remainder-man must wait for Jackson Recovery Centers’ term to expire; therefore, the value of the remainder-man’s interest is discounted for the “time cost” of waiting. In other words, the cost of making a gift is lower because the value of the gift is decreased by the value of the annuity interest donated to Jackson Recovery Centers.

When the assets in the trust are transferred to the remainderman, any appreciation on the value of the assets is free of either gift or estate taxation in your estate.

For more information please contact:

Carey Snow
Vice President of Resource Development
Executive Director of the Jackson Foundation



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