A Grantor Charitable Lead Annuity Trust (CLAT) is an irrevocable split-interest trust that provides for a specified amount to be paid to one or more charitable beneficiaries during the term of the trust. The principal remaining in the trust at the end of the term is paid over to, or held in a continuing trust for, a non-charitable beneficiary or beneficiaries identified in the trust. If the terms of a CLAT created during the donor's life satisfy the applicable statutory and regulatory requirements, a gift of the charitable lead annuity interest will qualify for the gift tax charitable deduction under § 2522(c)(2)(B) and/or the estate tax charitable deduction under § 2055(e)(2)(B). In certain cases, the gift of the annuity interest may also qualify for the income tax charitable deduction under § 170(a). The value of the remainder interest is a taxable gift by the donor at the time of the donor's contribution to the trust.
This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
A Massachusetts Inter Vivos Granter Charitable Lead Annuity Trust (MA — IVCAT) is a type of charitable trust established during the lifetime of the granter for the benefit of a qualified charitable organization in the state of Massachusetts. This trust allows the granter to make charitable donations and receive potential tax benefits while still retaining control over the trust assets. In an MA — IVCAT, the grantor transfers assets, such as cash or property, to the trust and names a qualified charitable organization as the beneficiary. The trust will then pay a fixed annuity amount to the charitable organization for a specific term or until the granter's death. At the end of the term, any remaining assets in the trust will be distributed to non-charitable beneficiaries, such as family members or other individuals specified by the granter. One of the primary benefits of establishing an MA — IVCAT is the potential reduction of estate and gift taxes. The granter can receive an immediate income tax deduction for the present value of the expected annuity payments made to the charitable organization. Moreover, the assets in the trust are removed from the granter's estate, reducing potential estate taxes. There are different variations of an MA — IVCAT, including: 1. Charitable Lead Unitrust (CLU): In this variation, instead of paying a fixed annuity amount, the trust pays a fixed percentage of the trust assets' value, recalculated annually. This allows for potential growth in the trust's assets, benefiting both the charitable organization and the non-charitable beneficiaries. 2. Charitable Lead Annuity Trust (FLAT): This type of trust pays a fixed annuity amount to the charitable organization for a specific term or until the granter's death. Unlike the CLU, the value of the trust assets does not affect the annuity payment. 3. Flip Charitable Lead Trust (Flip CLT): A Flip CLT starts as a granter lead trust, with the granter receiving income from the trust for a specific period. After the predetermined period or specified event occurs, the trust "flips" into a charitable lead trust, and the income goes to the charitable organization. This type of trust can provide flexibility to the granter while supporting charitable causes. By utilizing an MA — IVCAT, individuals can fulfill their philanthropic goals, support charitable causes, and potentially reduce their tax obligations. However, it is essential to consult with an experienced estate planner or attorney to understand the specific requirements and implications of establishing an MA — IVCAT or its variations.
