Contents
Contents Contents
C H A P T E R S I X T E E N1 6Charitable Lead Trusts§ 16.1 General Rules 515§ 16.2 Income Interest 516§ 16.3 Income Tax CharitableDeduction 517§ 16.4 Tax Treatmentof CharitableLead Trusts 518§ 16.5 Testamentary Use ofCharitable Lead Trusts 520§ 16.6 Percentage LimitationRules 520§ 16.7 Private FoundationRules 521§ 16.8 Anti-Abuse RuleConcerning IncomeInterests 522(a) Abuse 522(b) Anti-Abuse Rulein General 523(c) Effective Date 523(d) Reformations 524§ 16.9 Charitable Income Trusts 524§ 16.10 Comparison withCharitable RemainderTrusts 525§ 16.11 Valuing CharitableDeduction 525The federal tax law provides for a form of planned giving that utilizes a splitinteresttrust called a charitable lead trust. 1 In general, a charitable lead trust is avehicle by which money or property is split into two interests: one or moreincome interests and one or more remainder interests. The income interest is to bepaid over to one or more charitable organizations, while the remainder interest isdestined for one or more noncharitable beneficiaries. (This type of planned givingis so named because the income interest created for charitable objectivesprecedes—or “leads”—the remainder interest.)The forms of planned giving discussed in the foregoing three chapters havethis common element: The donor transfers to a charitable organization theremainder interest in the money or property involved, with one or more noncharitablebeneficiaries retaining the income interest. The reverse may occur,however—and that is the essence of the charitable lead trust.§ 16.1 GENERAL RULESA charitable lead trust is a vehicle by which property transferred to it is apportionedinto an income interest and a remainder interest. Like the charitable1 The concepts of planned giving and split-interest trusts are discussed in Chapter 5. That chapter also containsa general description of charitable lead trusts. 515
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C H A P T E R S I X T E E N1 6Charitable Lead Trusts§ 16.1 General Rules 515§ 16.2 Income Interest 516§ 16.3 Income Tax CharitableDeduction 517§ 16.4 Tax Treatmentof CharitableLead Trusts 518§ 16.5 Testamentary Use ofCharitable Lead Trusts 520§ 16.6 Percentage LimitationRules 520§ 16.7 Private FoundationRules 521§ 16.8 Anti-Abuse RuleConcerning IncomeInterests 522(a) Abuse 522(b) Anti-Abuse Rulein General 523(c) Effective Date 523(d) Reformations 524§ 16.9 Charitable Income Trusts 524§ 16.10 Comparison withCharitable RemainderTrusts 525§ 16.11 Valuing CharitableDeduction 525The federal tax law provides for a form of planned giving that utilizes a splitinteresttrust called a charitable lead trust. 1 In general, a charitable lead trust is avehicle by which money or property is split into two interests: one or moreincome interests and one or more remainder interests. The income interest is to bepaid over to one or more charitable organizations, while the remainder interest isdestined for one or more noncharitable beneficiaries. (This type of planned givingis so named because the income interest created for charitable objectivesprecedes—or “leads”—the remainder interest.)The forms of planned giving discussed in the foregoing three chapters havethis common element: The donor transfers to a charitable organization theremainder interest in the money or property involved, with one or more noncharitablebeneficiaries retaining the income interest. The reverse may occur,however—and that is the essence of the charitable lead trust.§ 16.1 GENERAL RULESA charitable lead trust is a vehicle by which property transferred to it is apportionedinto an income interest and a remainder interest. Like the charitable1 The concepts of planned giving and split-interest trusts are discussed in Chapter 5. That chapter also containsa general description of charitable lead trusts. 515