Charitable Lead Trusts (Portfolio 866)

Tax Management Portfolio, Charitable Lead Trusts, No. 866, describes and analyzes the rules governing the creation and operation of qualifying nongrantor charitable lead trusts, both inter vivos and testamentary; grantor charitable lead trusts; and nonqualifying nongrantor lead trusts. Many of the technical rules and requirements for charitable lead trusts are related to the rules and concepts applicable to charitable remainder trusts. Thus, the reader may find it helpful to refer to 865 T.M., Charitable Remainder Trusts and Pooled Income Funds.

A charitable lead trust (also called a charitable income trust) is a trust in which the income interest is paid to a charitable beneficiary and the remainder interest either reverts to the grantor or is paid to a noncharitable beneficiary at the termination of the trust. Conceptually, a charitable lead trust is the opposite of a charitable remainder trust where the noncharitable beneficiary receives the income interest and the charitable beneficiary receives the remainder interest.

This Portfolio sets forth the basic requirements for obtaining the applicable charitable tax deductions for inter vivos and testamentary qualifying nongrantor charitable lead trusts and grantor charitable lead trusts and explores the taxation of nonqualifying charitable lead trusts and their beneficiaries. In addition, this Portfolio discusses certain planning considerations relating to qualifying nongrantor lead trusts, such as the identity of the trustees and the types of property that may be contributed to such trusts, and outlines the planning considerations relevant to the establishment of a nonqualifying nongrantor charitable lead trust. The final section of this Portfolio summarizes the taxation and planning considerations relevant to grantor charitable lead trusts.

Planners must follow the statutory requirements very carefully to ensure that the establishment of the trust has the desired income, gift, estate, and generation-skipping transfer tax consequences.

This Portfolio may be cited as Etheridge, 866 T.M., Charitable Lead Trusts.