Charitable Lead Trust

A charitable lead trust — CLT — is essentially the mirror image of a charitable remainder trust. Instead of the family receiving income first, the charity receives a defined stream of payments over a fixed number of years. When that term ends, whatever assets remain in the trust — ideally grown during the period — pass to the family's chosen beneficiaries, often children or grandchildren. Families commonly use CLTs as a way to make meaningful charitable gifts now while eventually transferring wealth to the next generation, potentially at a reduced gift- or estate-tax cost.

Two vocabulary terms come up frequently. A charitable lead annuity trust (CLAT) pays the charity a fixed dollar amount each year regardless of how the trust's assets perform. A charitable lead unitrust (CLUT) pays a fixed percentage of the trust's value as recalculated annually, so the charity's payment fluctuates with investment results. The key planning insight is that if the trust's assets grow faster than a benchmark rate set by tax authorities, more wealth passes to family members than the gift-tax calculation originally assumed — but these calculations are sensitive to rates and rules that change, so families must work with qualified attorneys and CPAs.

Consider a family patriarch who wants to honor a commitment to a hospital foundation while also transferring wealth to his grandchildren. A CLAT funded with appreciating assets might pay the hospital a set annual amount for fifteen years. If the underlying assets grow meaningfully above the benchmark rate during that period, the grandchildren receive a remainder that is larger than the taxable gift the patriarch was deemed to have made at inception. This structure sits comfortably within the broader organizational infrastructure — the family office itself — that coordinates tax, legal, and investment decisions together.