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 Kentucky Inter Vivos Granter Charitable Lead Annuity Trust (KY-GCLAT) is a type of charitable trust where the granter contributes assets to the trust during their lifetime while retaining an interest in the income generated by those assets. The purpose of the trust is to benefit one or more charitable organizations through annual payments over a specified term, after which the remaining trust assets are transferred to non-charitable beneficiaries. The Kentucky Inter Vivos Granter Charitable Lead Annuity Trust requires a granter who establishes the trust and contributes assets to it. The granter may choose to retain either a fixed annuity payment or a fixed percentage of the initial trust value throughout the term of the trust. The trust's term usually lasts for a specific number of years or until the granter's death. The annual annuity payments made by the Kentucky Inter Vivos Granter Charitable Lead Annuity Trust are typically distributed to one or more charitable organizations designated by the granter. These payments are deductible for federal income tax purposes, potentially reducing the granter's income tax liability. After the term of the trust ends, the remaining trust assets are distributed to the non-charitable beneficiaries, who are often family members or other individuals designated by the granter. These beneficiaries receive the assets with any appreciation they may have gained during the trust's existence. There are several variations and types of Kentucky Inter Vivos Granter Charitable Lead Annuity Trusts, including: 1. Non-Flip Charitable Lead Annuity Trust: In this type of trust, the granter designates a fixed annuity payment to charitable organizations throughout the trust term, without the possibility of shifting the beneficiaries. 2. Flip Charitable Lead Annuity Trust: This trust provides flexibility to the granter by allowing a change in beneficiary designation (from charitable beneficiaries to non-charitable beneficiaries) during the trust term. The flip is triggered by a predetermined event such as a specific date, triggering a change in trustee, or an event affecting the trust's qualification. 3. Net Income Charitable Lead Annuity Trust: In this trust, the annuity payment to charitable organizations is determined based on the trust's net income in a given year. If the trust's net income is insufficient, the annuity payment may be reduced or even eliminated. However, any excess income in subsequent years can be used to compensate for the shortfall. 4. Charitable Lead Unit rust: Unlike the annuity trust, the charitable lead unit rust distributes a fixed percentage of the net fair market value of the trust assets each year to charitable beneficiaries. The payment amount varies each year based on the trust's value, providing potential growth or decline in distributions. 5. Granter Retained Annuity Trust with Charitable Lead Interest: This type of trust combines a charitable lead interest with a granter retained annuity trust. It allows the granter to receive fixed annuity payments for a specified term while also making annuity payments to charitable organizations. At the end of the trust term, the remaining assets pass to non-charitable beneficiaries. Kentucky Inter Vivos Granter Charitable Lead Annuity Trusts offer an avenue for individuals to support charitable causes during their lifetime while retaining certain financial benefits. Consulting with a knowledgeable attorney or financial advisor is essential when considering the creation of such a trust to ensure compliance with relevant state laws and to tailor the structure to the granter's specific objectives.
