One goal of a CLT is to gain a charitable deduction for the income distributed to the charity, but the major attraction clients find with CLTs is that they can reduce the value of estate assets for estate tax purposes.
Some types of lead trusts will generate a current income tax deduction equal to the present value of the income stream to the charity. A significant attraction that a lead trust offers is the long-term protection it provides for the donor's assets. A trust can be constructed that will substantially reduce or eliminate the estate tax that would eventually be due on the transfer of those assets to the donor's heirs. In addition, any appreciation to the value of the principal that accrues after the trust has been established passes to the beneficiaries free of additional gift and estate taxes.
Copyright ONFS. Taken from ESTATEPLANNING PowerPoint Presentation, downloadable through ON-Net.
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