The Tax Law of Charitable Giving, 5th Edition

Chapter SixteenCharitable Lead Trusts

1. § 16.1 General Rules
2. § 16.2 Income Interest
3. § 16.3 Income Tax Charitable Deduction
4. § 16.4 Tax Treatment of Charitable Lead Trusts
5. § 16.5 Testamentary Use of Charitable Lead Trusts
6. § 16.6 Percentage Limitation Rules
7. § 16.7 Private Foundation Rules
8. § 16.8 Anti-Abuse Rule Concerning Income Interests
   1. (a) Abuse
   2. (b) Anti-Abuse Rule in General
   3. (c) Effective Date
   4. (d) Reformations
9. § 16.9 Charitable Income Trusts
10. § 16.10 Comparison with Charitable Remainder Trusts
11. § 16.11 Valuing Charitable Deduction

The federal tax law provides for a form of planned giving that utilizes a split-interest trust called a charitable lead trust.¹ In general, a charitable lead trust is a vehicle by which money or property is split into two interests: one or more income interests and one or more remainder interests. The income interest is to be paid over to one or more charitable organizations, while the remainder interest is destined for one or more noncharitable beneficiaries. (This type of planned giving is so named because the income interest created for charitable objectives precedes—or “leads”—the remainder interest.)

The forms of planned giving discussed in the foregoing three chapters have this common element: The donor transfers to a charitable organization the remainder interest in the money or property involved, with one or more noncharitable beneficiaries retaining the income interest. The reverse may occur, however—and that is the essence of the charitable ...