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Charitable Lead Trusts

Another estate litigation strategy that was used by Jackie Kennedy Onassis is the charitable lead trusts ("CLT"). A CLT is an irrevocable trust which provides a way to donate money to charity with the possible benefit of passing on the remainder of the trust assets to the donor's heirs, such as children or grandchildren, at a reduced gift or estate tax cost.

In a low interest rate environment, CLT's can be quite attractive to those who have sufficient income to take advantage of charitable tax deductions for the entire amount put into the trust. The Internal Revenue Service ("IRS") sets what is called a hurdle or discount rate that is tied to the U.S. treasury rates. A lower rate means that lower payments can be made to a charity; and if the CLT's income exceeds the payments made to the charity, then the excess income may be accumulated and added to the principal for eventual distribution to the non-charitable beneficiaries. As a general rule, however, excess income may not be distributed to the non-charitable beneficiaries until the charity's interest ends.

*This blog entry was not written by an Attorney and should not be construed as professional legal advice.

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