When Should You Consider Using a Charitable Lead Annuity Trust?

If you experience an income or financial surge this year like a bonus, a sale of crypto currency, or appreciated option exercises, you may wish to use a charitable lead annuity trust strategy to respond to it. There are three primary situations that should trigger you to think about a grantor CLAT.

They include:

  • You have a very high tax bracket due to your income
  • A low interest rate environment exists
  • You have a long period of time to allow your money to grow without touching it

Whether you’re paying significant taxes on crypto farming, receiving RSUs taxed as ordinary income or exercised start up equity that has appreciated highly, there are tax benefits you can tap into through a CLAT. The first is the ability to create return arbitrage and second is to shift your current income into long term capital gains.

The major downside of using a grantor CLAT is that you will not have immediate access to the capital. You will need to plan for the capital to set aside for at least 20 years and you do remain responsible for the income inside the trust in that interim period.

To determine whether or not a grantor CLAT is the most appropriate tool for you to create in 2021 or early 2022, you should schedule a consultation with an experienced and knowledgeable lawyer to discuss your next steps.


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