Charitable lead trust is an irrevocable trust that that is made in favor of a charity and that allows the charity to receive income from the trust property for a specific length of time then leaves the remainder of the trust to designated beneficiaries, usually family members. It is called a lead trust because the charities are entitled to the lead interest in the trust asset, and the non charitable beneficiary receives the remainder interest.

There are two types of charitable lead trusts: charitable lead annuity trusts and charitable lead unitrusts. In charitable lead annuity trusts, the donor sets a fixed annual gift for the charities named. In charitable lead unitrusts the charities receive a percentage of the trust’s value each year.

Charitable Lead Trust (CLT) is a powerful tax planning and wealth transfer tool. The whole idea of a charitable lead trust is to reduce taxes upon the estate left by the deceased.