Advanced Marketing Forum Question

Charitable Lead Trust

Question:
I have a client (married) that wishes to make an annual gift to a charitable recipient (a hospital), in the amount of $200,000 per year for 10 years.

He wants his estate to continue to make this distribution upon his death, in the event that he dies before the end of the 10 year period.

If he sets up his estate plan to include a charitable lead trust, funded at his death, to continue to make the payments, with remainder to his wife, is there any way to qualify the non-charitable remainder value for the marital deduction?

Reply:
The client would be better off doing a Charitable Remainder Trust, rather than a Charitable Lead Trust. Generally speaking, with the scenario that was described below, the client would not get the marital deduction unless his wife received the income payments, rather than the charity.

Alternatively, the couple can plan to set up the CLAT in the second estate (the wife's) with assets the surviving spouse obtains through the marital deduction. A CLAT can be set up to provide for a fixed term of years and fixed annual payment. In this case, they can fund the CLAT with $2M assets and provide for a 5% payout amount for 10 years.

Rachna D. Balakrishna
Assistant Vice President/Associate Counsel
Manulife Financial, US Insurance
73 Tremont Street
Boston, MA 02108
E-mail: rbalakrishna@manulifeUSA.com
Phone: (888) 266-7498 x4423

* The foregoing is for broker/agent use only, and is intended solely for informational purposes. Nothing contained herein should be construed as legal or tax advice, and should not be relied upon for such. Legal and tax advice should only be obtained from your attorney or qualified tax professional.

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