Using a CLAT to create an income stream to charities

June 8, 2020

Using a CLAT to create an income stream to charitiesOur recent communications have highlighted the unique importance of Qualified Charitable Distributions (QCDs) and Charitable Lead Annuity Trusts (CLATs) in today’s market conditions. Given the critical needs facing our community right now, the team at the Community Foundation wants to reiterate the value of these two planning tools. We’re inviting you to contact us if you have any questions about how these charitable giving techniques can help you or your clients immediately support people in need.

In the case of Charitable Lead Annuity Trusts, some experts are heralding a “golden age of CLATs” because of the convergence of historically low interest rates and depressed asset values. The timing may never be better for you to use a CLAT to create an income stream to charities, thereby satisfying your current goals for amping up philanthropy in this period of extreme need, and simultaneously establish a future gift to heirs with the trust’s remainder.

Don’t overlook Qualified Charitable Distributions, either, as a way to meet the urgent needs of the charities you want to support. The Coronavirus Aid, Relief, and Economic Security (CARES) Act waives Required Minimum Distributions for most taxpayers. The provision includes not only distributions from 401(k)s and IRAs, but also defined benefit pension plans and 457 plans. Taxpayers who have reached 70½ years of age still can take advantage of the Qualified Charitable Distribution, enabling a taxpayer to direct up to $100,000 from an IRA to qualified charities. The distribution is not included in taxable income.

With questions about QCDs or using a CLAT to create an income stream to charities, please contact the Community Foundation of New Jersey’s finance team at (973) 267-5533. Also consider reviewing our fact sheets:

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