A charitable lead trust is a trust with both charitable and non charitable beneficiaries.  It is called a lead trust because it is the charity that is entitled to the lead interest in the trust property.  After a specified term, the remaining trust property passes to you or another non-charitable beneficiary you designate.

- A desire to donate to AARF PA
- A substantial asset to donate to AARF PA

Key Tradeoffs
- No income tax deduction unless you are also the “owner” of the charitable lead trust
- Requires an irrevocable commitment
- Requires the charitable payment to be made each year, regardless of whether there is sufficient trust income available

Key Strengths
- Provides a gift and estate tax haven for assets expected to appreciate in value
- Allows you to donate to AARF PA and keep trust assets within the family
- Allows you to postpone the non-charitable beneficiary’s receipt of the trust assets
- Allows you to choose the payment method to AARF PA
- Does not require any minimum percentage payout to AARF PA
- Reduces potential federal estate tax liability


​​1. Tust is funded

2. Income goes to AARF PA first

3. Balance goes to you or your family

Charitable Lead Trust

Why use a charitable lead trust?

The charitable lead trust is an excellent estate planning vehicle if you are optimistic about the future performance of the investments in the trust.  If created properly, a charitable lead trust allows you to keep an asset in the family while being an effective tax-minimization device.

How does it vary from state to state?

- Community property states may affect any gift tax due
- In certain instances (when the trust document is silent), state law may determine the source of payments made from the trust to charity and the order in which they are to be used

How is it implemented?

- Consult a legal professional to draft the charitable lead trust document
- Select a non-charitable beneficiary, a charitable beneficiary (AARF PA), and a trustee
- Select the assets you want to use to fund the charitable lead trust
- Select an appraiser or other professional to value unmarketable assets
- Select the term of the trust and the payment method (annuity or unitrust)