CLUT, CLUT, CLAT
Everything you always wanted to know about charitable lead trusts but were afraid to ask.
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One technique to truly minimize the transfer tax impact is a zeroed-out CLAT.
Here the value of the annuity passing to the charity is equal to the value of the assets transferred to the trust. The value of the interest passing to the non-charitable beneficiaries at the start of the trust is zero. The intent is that the trust assets experience significant appreciation in value that ultimately will pass to the non-charitable beneficiaries. A zeroed-out CLAT can only run for a term of years.
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Kathleen Stephenson
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Lisa B. Petkun
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Lisa B. Petkun is a partner in the tax department at Pepper Hamilton LLP.
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