IRC §2522(c)(2)(B) · §170(f)(2)(B)

Charitable Lead Annuity Trust

Fixed annuity to charity for a term. Remainder passes to heirs. A "zeroed-out" CLAT can transfer wealth gift-tax-free.

CLAT Projection
Annual annuity to charity
$0
Total to charity over term
$0
Charitable deduction (PV of stream)
$0
Taxable gift to remainder beneficiaries
$0
Projected remainder to heirs
$0
Effective wealth transfer
$0

Grantor CLAT

  • Upfront §170 income tax deduction
  • Grantor pays tax on trust income
  • Remainder passes outside grantor's estate
  • Best when grantor has a high-income year

Non-grantor CLAT

  • Trust pays its own income tax (§642(c) deduction for annuity)
  • No upfront §170 deduction to grantor
  • Better when grantor cannot use a large deduction
  • Common for estate-planning "zeroed-out" CLATs
Charitable deduction is the present value of the annuity stream at the §7520 rate, per §170(f)(2)(B). "Zeroed-out" CLAT sets PV = corpus, eliminating taxable gift.
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IRC §170(f)(2)(B) charitable deduction; §2522(c)(2)(B) gift tax; §7520 valuation rate (IRS publishes monthly). Educational tool, not legal advice. Call 689-331-5723 or email info@zerofusstaxes.com.