iCLATs are simpler than traditional charitable lead trusts (CLTs) because they are solely focused on saving income taxes.  By design, iCLATs have absolutely nothing to do with saving estate taxes, gift taxes and GST taxes, which is the primary goal of traditional forms of CLTs.  As a result, there are fewer restrictions, challenges and potential pitfalls with iCLATs, compared to traditional CLTs. This singular "income tax" savings purpose of an iCLAT means that it is easier to understand, establish, and administer than traditional CLTs.Because of its simplicity, most iCLATs can be designed, established, and funded in 2 to 3 weeks, not months (or years), which is often the case with traditional CLTs.

Two words….PRESENT VALUE.   This is one of the key concepts of the iCLAT, which is unlike the manner by which the charitable deduction is determined with all other tools in the charitably planning toolbox.  Pursuant to IRC section 170(f)(2)(B) and Treasury Regulation 1.170A-6(c), the charitable tax deduction is simply determined by a "present value" calculation of the iCLAT's annual charitable distributions during its term, that's it. The interest rate used to determine the present value of the annual charitable distributions from an iCLAT is the §7520 interest rate, which is published monthly by the IRS. The lower the discount interest rate, then the larger the present value and, by extension, the immediate charitable deduction generated by an iCLAT.  Currently, the IRS 7520 rate for September 2026 is 5.4%  Over the past 5 years, the IRS 7520 rate has ranged from 0.4% to 5.4%.

The "i" stands for two things: 1. "i"ncome tax savings (not estate tax savings) from recurring annual gifts to charity.  2. The "i" also stands for the DONOR/CLIENT from his or her point of view. From a planning perspective, an iCLAT is 100% focused on the DONOR/CLIENT, not on the future needs of a spouse, children, and/or grandchildren. This planning focus on the DONOR/CLIENT's current income tax savings objectives, and NOT on future unknown events (like the death of the DONOR/CLIENT and estate taxes), means that an iCLAT is much easier to explain and understand, particularly compared to other common charitable planning strategies.

Yes.  An "iCLAT" is technically known as a "reversionary" charitable lead annuity trust, which is taxed as a "grantor trust" for federal income tax purposes. Qualified reversionary charitable lead trusts have been around since 1986 and are well-established tools in the charitable planned giving toolbox. For multiple reasons, “reversionary” CLATs are the lesser-known type of charitable lead trust (by far!) primarily because they do not provide any estate tax savings. The singular income tax savings benefit of an iCLAT is why most estate planning attorneys (And other professionals) are not well-versed with iCLATs.

No, not really. The only practical limitation is that an iCLAT must have a term of at least two years. There is NO maximum number of years for the term of years for an iCLAT.

No.  However, the vast majority of iCLATs are set up with a fixed annual charitable distribution stream to their preferred charities. The IRS does allow increasing annual payments based on a set percentage each year, pursuant to treasury regulations and IRS rulings. For example, an iCLAT can have payments increase at a set percentage of 20% each year. Furthermore, IRS Rev. Proc. 2007-43 provides additional IRS authority for an iCLAT's charitable distribution structure to be based on a more flexible increasing annuity, such as fixed payments for a term of years, followed by one or more increasing balloon type charitable distributions.

Yes, absolutely! This is because an iCLAT is not an estate tax savings tool, Therefore, IRC section 2036 is not a concern. The iCLAT assets will always be included in the grantor's "gross estate" for estate tax purposes if he or she dies during the term of the iCLAT. Since the estate tax unified credit applicable exemption amount for 2026 is $15,000,000 per spouse, the automatic inclusion of the iCLAT assets in the gross estate is not a problem for over 99% of the U.S. population. In other words, the typical limitations on who can serve as a trustee of traditional "wealth transfer" CLT are simply NOT applicable with an iCLAT.

ABSOLUTELY! In fact, that is standard procedure for us. During our typical intake process, we will regularly collaborate with one or more of your our clients' professional advisors. We always encourage professional advisors to get involved as early as possible.

Unlike traditional charitable lead trusts, there are no restrictions on your ability to change the recipient charities that receive the annual payments from the iCLAT. As noted previously, you can also have the charitable lead trust payments be distributed directly to a donor advised fund or private foundation to retain even more flexibility regarding the timing of when the payments can be received by the ultimate public charity.

Yes. In fact, this is how many iCLATs are intentionally structured. By having a donor advised fund receive part or all of the charitable payments, the donor (and his or her applicable family members) can retain even more control over the timing of the ultimate grant-making of the charitable dollars to charity, as well as greater anonymity - if desired.

Yes. Part or all of the annual charitable payments can be made directly to your church or other place of worship. Many people look to make their ongoing tithes and offerings directly from their iCLAT. This is allowed because, for purposes of the charitable income tax deduction under 170(c) of the Internal Revenue Code, contributions to churches and other places of worship are treated the same as those made directly to a non-profit organization that qualifies as a "public charity" for purposes of 501(c) of the Internal Revenue Code.

This is one of the most common and important questions that we receive once folks take a closer look at the iCLAT. Our team is often asked something like this, "Ok, I get it now. I understand that I'll get a huge upfront charitable deduction if I do an iCLAT, but what is the smallest amount that I have to put into the iCLAT?"Well, good news. The simple answer is provided directly in the Treasury Regulations (Treas Reg. §1.170A-6(c)(3)(iii) and Example 1. In general terms, the iCLAT needs to be funded with assets having a total value that is at least equal to the value of the charitable deduction that will be generated in year 1. For example, a 10 year iCLAT created in May 2020 which distributes $25,000 on an annual basis would have generated an immediate year 1 charitable deduction of $241,945. Well, there is your answer for the absolute minimum value of assets that need to be initially funded in this hypothetical iCLAT.For various reasons, it is rare when the absolute minimum amount is used to fund an iCLAT. Rather, it would be more advisable to use the sum total of the iCLATs charitable payments plus at least a 5% cushion amount to serve as a guide as the appropriate minimal funding amount. For the above example (total of $250,000 to be distributed to charity over its 10 year term), depending on several factors, it would be advisable to fund the iCLAT with as little as $275,000 in assets.

Since all iCLATs are "grantor trusts" for federal income tax purposes, all the income (interest, dividends, rents, capital gains, royalties, etc.) from the assets owned by the iCLAT are taxed to the grantor (creator of the iCLAT) and reported on the grantor's income tax return. Conversely, any losses incurred by the iCLAT assets are reported directly on the grantor's income tax return as well.

No, not at all. An iCLAT can be designed to split the annual charitable distributions among 2, 3, 4 or more different charities. In fact, most our clients' iCLATs are designed so that recipient charities can change each year. Finally, the iCLAT can also make part or all of its annual charitable distributions to a donor advised fund or a private foundation.

YES, but it depends on the state where you live. Not all the states that have an additional state income tax allow for a charitable deduction at the state level. For example, Massachusetts, Pennsylvania, Illinois and New Jersey, which all have an additional income tax at the state level do NOT have a corresponding charitable deduction at the state level. However, the good news is that most do! The following five states will generate the greatest amount of additional income taxes at the state level: California, Minnesota, New York, Oregon and Wisconsin.