Charitable Lead Annuity Trust

A charitable lead annuity trust (CLAT) is a charitable annuity setup directly through an insurance company, or a similar organization, regularly engaged in the business of issuing annuity contracts. The donor makes an initial deposit to the CRAT and the charity receives the fixed annual income steam for a fixed number of years. At the end of the term of the trust, the donor’s beneficiary will receive the remaining interest.

Characteristics of a CLAT:

  • Fixed annuity stream to a charity, fixed percentage.
  • Initial deposit is only allowed.
  • Effectively removes assets from the estate of the grantor.
  • At the end of the term, remainder interest is paid to a non-charitable beneficiary.
  • The donor receives an income tax deduction on FMV of the property transferred.