Charitable Lead Trust
A charitable lead trust is a type of irrevocable trust designed to reduce a beneficiary's potential tax liability, upon inheritance.
A charitable lead trust works by donating payments out of the trust to charity, for a set amount of time. After that period expires, the balance of the trust is then paid out to the beneficiary. While this reduces the taxes owed by the beneficiary, once they inherit the remaining balance, it also presents them with other potential tax benefits, such as income tax deduction for charitable donations, and savings on estate and gift taxes. These forms of trusts are generally set up during the process of estate planning when benefactors desire to reduce the possible burdens beneficiaries would normally incur by receiving their inheritance.
