A charitable lead trust (CLT) allows the donor to make a significant gift to Millikin currently, and receive the trust assets back at some point in the future. Here's is an example of how a CLT works: A donor funds a CLT by irrevocably transferring $1 million to a trustee and establishes a payout rate of 5% annually for ten years. 5% of $1 million is $50,000 annually, paid to the donor. After the ten year period expires, the donor receives the trust assets back. The donor is eligible to receive an immediate income-tax deduction in the year he or she makes the gift. Please note, because the donor is going to receive the trust assets back in the future, he or she will be taxed on the income earned by the trust each year.
In a "grantor" CLT, the donor receives the trust assets back after a period of years. This strategy can be particularly advantageous to a donor with high taxable income, as the benefit of the large upfront tax deduction may outweigh the burden of the annual tax paid on the trust earnings.
Under a "non-grantor" CLT, the donor opts to have the trust assets returned to a different person he or she chooses, such as family members.