Charitable lead trust (CRT) - Financial definition
Concise definition of the term charitable lead trust
A charitable lead trust (CLT) is a financial arrangement where a donor places assets in a trust, which provides regular payments to a charity for a specified period, after which the remaining assets are transferred to beneficiaries.
Comprehensive definition of the term charitable lead trust
In the context of estate planning and philanthropy, a charitable lead trust (CLT) allows individuals to support charitable organizations while also planning for their beneficiaries' future financial security. The trust distributes income to one or more charities for a predetermined number of years or the lifetime of the donor, depending on the terms. Once the trust term expires, the remaining principal is passed on to the donor's heirs or other designated beneficiaries, often with significant tax advantages.
CLTs are commonly used by high-net-worth individuals to reduce their taxable estate, providing both philanthropic and financial benefits. For example, a donor might establish a CLT to fund a favorite charity annually while ultimately transferring the trust assets to their children with reduced gift and estate tax liability.