What is a Charitable Lead Annuity Trust?

A charitable lead annuity trust is defined as a way to gift a donation to charity over time, with the remainder of the trust eventually being given to the grantor’s heirs. A donor transfers an asset into a trust, which is set to exist for a certain amount of time. During that time, the trust provides income to the charity. Once the period has expired, the rest of the trust is given to the grantor’s heirs or other beneficiaries. The beneficiary can also be the grantor themselves, assuming they are still alive.

The benefit of a charitable lead annuity trust is that the grantor is able to give money to charity over time without having to give up their assets entirely. Their assets will be returned to them or their heirs eventually, at which point it can be used, donated, or put in another trust. During the period the trust exists, the grantor is not responsible for the taxes related to that trust, and therefore is able to retain these assets without having to pay taxes on the assets. The downside is that they don’t have control during that time. Because the trust is not directly controlled by the grantor, it will also need its own Trust Tax ID Number.