The Charitable Lead Trust: A Neglected Tax Planning Technique.

The charitable lead trust is a "split-interest" trust established to direct a series of payments to a qualifying charitable organization over a period of time and to transfer the remainder interest in the trust assets to non-charitable beneficiaries selected by the donor. This device has received rather poor reviews from tax professionals during the last decade. The present analysis asserts that such poor reviews may be improper, i.e., that the value of the estate-freezing and transfer tax deduction opportunities presented by the charitable lead trust prompt a closer examination of the technique. Briefly, these opportunities include: (1) the ability to manipulate the applicable transfer tax liability upon creation of the trust; (2) the ability to maximize the wealth to be transferred to the selected non-charitable beneficiaries, even after introducing the charity as a "new" donee; and, (3) the ability to overcome many of the negative implications from the potential grantor trust status of the device.