An "iCLAT" is simply a trust that makes annual distributions to charity for a specified term of years and then, at the end of the term, distributes the remaining trust assets back to its grantor (i.e. the donor or the client). For legal and IRS purposes, an iCLAT is known as a "reversionary" charitable lead annuity trust, which is treated as a "grantor trust" for federal income tax purposes. Importantly, an iCLAT has nothing to do with saving estate taxes, or estate planning for that matter. Think of an iCLAT as an "Income Tax Savings CLAT"
WHAT is an iCLAT?
HOW does an iCLAT generate so much IMMEDIATE TAX SAVINGS?
WHO can most benefit from an iCLAT?
WHY is 2020 the best year to create an iCLAT?
An iCLAT will work best for someone regularly gives at least $10,000 per year to one or more charities (including their place of worship)
(1) has a sudden current year increase in "ordinary income" of $250,000 or more;
(2) has a high current level of income that is expected to end within the next two years from retirement, the end of a lucrative contract, or other reasons.
The IMMEDIATE YEAR 1 charitable tax deduction generated by an iCLAT is equal to the "present value" of it's annual payments to charity - using the IRS §7520 interest rate, which is released each month. Since the IRS §7520 interest rate is currently at its new historic low of 0.6% (July 2020), the resulting charitable tax deductions from iCLATs have never been higher than they are right now! Use the iCLAT Calculator Tool to instantly determine the IMMEDIATE income tax deduction that a particular iCLAT can generate for you, your donor, or your client.
4 REASONS WHY:
As a result of the recent doubling of the standard deduction (effective 1/1/2018), it is harder than ever to receive any additional tax savings for annual charitable gifts under $24,800/year (married persons), $12,400/year (single person) and $18,650 (heads of household).
The reasonable probability of more legislative restrictions to the charitable deduction in the near future.
The continued suspension of the overall limitation on itemized deductions for high-income individuals (the so-called "Pease Limitation") until December 31, 2025.