An iCLAT is much easier to explain, establish and administer because its sole focus is on saving income taxes - not estate taxes. From a planning and implementation perspective, the value of this advantage can not be overstated. An CLAT is not only easier for the client to understand, but it also much easier for the client's financial planner, accountant and estate planning attorney to fully understand. For example, an iCLAT will not disrupt the client's current estate planning documents, which quickly addresses the most common questions from his or her estate planning attorney. In most cases, iCLATs are simply funded with cash or marketable securities. Therefore, the new account owned by the iCLAT can simply be held and managed by the client's current financial planner. Finally, the common tax questions from the client's accountant can be quickly addressed by the fact that iCLAT is a "grantor trust" for income tax purposes and not a separate taxpayer. This means that an iCLAT will only have to file an "informational" IRS Form 1041, along with an IRS Form 5227, on an annual basis. TAKE A LOOK AT SEVERAL EXAMPLES
Less Disruptive & Increased Planning Flexibility
The client can serve as the sole trustee an iCLAT. This will provide the client with a much greater level of retained control in comparison to traditional charitable lead trusts. This is because the retained control concerns of IRC §2036, which are present in traditional CLTs, are completely irrelevant to an iCLAT. This means that there are fewer restrictions imposed on the donor trustee during the administration of the iCLAT. In other words, there are fewer concerns during the administration of the iCLAT. As many attorneys, advisors and gift planners know very well, retained control is often a major concern of clients before implementing any planned giving or estate planning strategy. Due to the inherent planning flexibility present with an iCLAT - this common "retained control issue" is simply not an issue!
Sole Focus = Saving Income Taxes (not estate taxes)
Unlike traditional charitable lead trusts, an iCLAT has absolutely nothing to do with saving future estate taxes - and this is by design! Rather, an iCLAT is solely designed to save current income taxes - plain and simple. From an applicability perspective, this fact is so very important because income taxes impact exponentially more families than estate taxes. Currently, estate taxes only impact only the wealthiest of high net worth families (the estate tax unified credit exemption amount in 2020 $11,580,000 per person & $23,160,000 per married couple). That is the very reason why traditional charitable lead trusts (CLTs) are only applicable to a very small class of people and, frankly, simply overlooked by most advisors and experienced gift planners. Conversely, almost all Americans are impacted every single year by income taxes. As a result, saving current income taxes this year is almost always a higher priority to clients than saving potential estate taxes in the future. An iCLAT's sole focus on saving income taxes is why it is much more applicable than traditional CLTs.
Quicker Implementation & Less Disruption to Client/Donor
Compared to traditional charitable lead trusts, iCLATs have significantly fewer issues to discuss with the client's trusted attorney, financial planner and/or accountant. Since the advice of one or more of these should always be sought and obtained prior to implementing any planning giving strategy, including an iCLAT, the proper communication with these advisors often requires additional time and potential professional expenses. Because the iCLAT has a singular planning objective, saving current income taxes, all this time (and expense) is greatly reduced with an iCLAT! Typically, an iCLAT can be designed, signed and fully funded in just a few weeks!