Charitable trusts are a popular planning tool for donors and their advisors.
A charitable lead trust (CLT) is designed to provide income to a charity for a certain length of time, after which the trust assets are distributed back to the donor or their heirs.
So, what are the benefits of a CLT? Depending on the type, donors have found that benefits include:
- Immediate income to charity
- Immediate income tax deduction or reduction in estate tax*
- Transfer of assets to heirs
- Potential increase in trust asset value
- Return of trust assets to the donor
For donors looking for added flexibility, a donor-advised fund (DAF) can be named as the charitable beneficiary of a charitable lead trust.
What’s the Advantage of Naming a DAF the Charitable Beneficiary of a CLT?
When assets flow from a charitable trust into a DAF, the donor and their family can decide over time which charities they wish to support. This approach allows for year-to-year flexibility, unlike naming specific charities as beneficiaries in the trust document, which can be costly, complex or even impossible to change once established.
Naming an AEF DAF as the charitable beneficiary of a charitable trust adds even more flexibility: in many cases, the family’s trusted financial advisor can administer the fund’s investments.
AEF can help donors and advisors build a plan that has the charitable impact a donor wants to make. Contact us or call 1-888-966-8170 with any further questions.
*Note: AEF does not provide tax advice. Work with your trusted legal and tax advisors to determine the right CLT structure for you.