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Charitable Lead Trust

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Inter Vivos Grantor Charitable Lead Annuity Trust

On this the day of , 20, I, , hereinafter called the Donor, residing at , desiring to establish a charitable lead annuity Trust within the meaning of the SAMPLE INTER VIVOS CHARITABLE LEAD ANNUITY TRUST (CLAT), Rev. Proc. 2007-45, 2007 WL 1792950 (2007), hereby enter into this Trust Agreement with , a National Bank incorporated pursuant to the laws of the United States, (hereinafter the Trustee). This Trust shall be known as the . All references to section or § in this instrument shall refer to the Internal Revenue Code of 1986, 26 U.S.C.A. §§ 1 et seq.

I. Funding of Trust.

Donor hereby transfers and irrevocably assigns to the Trustee on the above date, the property described in Schedule A attached hereto and made a part hereof, and the Trustee accepts the property and agrees to hold, manage, and distribute the property under the terms set forth in this Trust instrument.

(Note: You have several choices for Paragraph II, but you can only use one)

II. Payment of Annuity Amount.

In each taxable year of the Trust during the annuity period, the Trustee shall pay to , hereinafter called Recipient, an annuity amount equal to % of the initial net fair market value of all property transferred to the Trust, valued as of the date of the transfer. If Recipient is not an organization described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall instead distribute such payments to one or more organizations described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) as the Trustee shall select, and in such proportions as the Trustee shall decide, from time to time, in the Trustee's sole discretion. The term the Charitable Organization shall be used herein to refer collectively to the organization(s) then constituting the charitable recipient, whether named in this paragraph or subsequently selected as the substitute charitable recipient. During the Trust term, no payment shall be made to any person other than the Charitable Organization. The annuity period is a term of years. The first day of the annuity period shall be the date the property is transferred to the Trust, and the last day of the annuity period shall be the day preceding the anniversary of that date. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and, to the extent that income is not sufficient, from principal. Any income of the Trust for a taxable year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the Trust assets is incorrectly determined, then within a reasonable period after the value is finally determined for Federal tax purposes, the Trustee shall pay to the Charitable Organization (in the case of an undervaluation) or receive from the Charitable Organization (in the case of an overvaluation) an amount equal to the difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.

(OR):

II. Payment of Annuity Amount.

In each taxable year of the Trust during the annuity period, the Trustee shall pay to , hereinafter called Recipient, an annuity amount equal to % of the initial net fair market value of all property transferred to the Trust, valued as of the date of the transfer. If Recipient is not an organization described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall instead distribute such payments to one or more organizations described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) as the Trustee shall select, and in such proportions as the Trustee shall decide, from time to time, in the Trustee's sole discretion. The annuity period is a term of years. The annuity period is the lifetime of . The first day of the annuity period shall be the date the property is transferred to the Trust, and the last day of the annuity period shall be the date of death of . Any income of the Trust for a taxable year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the Trust assets is incorrectly determined, then within a reasonable period after the value is finally determined for federal tax purposes, the Trustee shall pay to the Charitable Organization (in the case of an undervaluation) or receive from the Charitable Organization (in the case of an overvaluation) an amount equal to the difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.

(OR):

II. Payment of Annuity Amount.

In each taxable year of the Trust during the annuity period, the Trustee shall pay to , hereinafter called Recipient, an annuity amount equal to % of the initial net fair market value of all property transferred to the Trust, valued as of the date of the transfer. If Recipient is not an organization described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall instead distribute such payments to one or more organizations described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) as the Trustee shall select, and in such proportions as the Trustee shall decide, from time to time, in the Trustee's sole discretion. Notwithstanding the preceding sentence, the Donor reserves the right to designate as the charitable annuity recipient, at any time and from time to time, in lieu of Recipient, one or more organizations described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) and shall make any such designation by giving written notice to the Trustee. The term the Charitable Organization shall be used herein to refer collectively to the organization(s) then constituting the charitable recipient, whether named in this Paragraph or subsequently selected as the substitute charitable recipient. During the Trust term, no payment shall be made to any person other than the Charitable Organization. The annuity period is a term of years. The first day of the annuity period shall be the date the property is transferred to the Trust, and the last day of the annuity period shall be the day preceding the anniversary of that date. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and, to the extent that income is not sufficient, from principal. Any income of the Trust for a taxable year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the Trust assets is incorrectly determined, then within a reasonable period after the value is finally determined for federal tax purposes, the Trustee shall pay to the Charitable Organization (in the case of an undervaluation) or receive from the Charitable Organization (in the case of an overvaluation) an amount equal to the difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.

(OR:)

II. Payment of Annuity Amount.

In each taxable year of the Trust during the annuity period, the Trustee shall pay to one or more members of a class comprised of organizations described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) (hereinafter, collectively the Charitable Organization) an annuity amount equal to % of the initial net fair market value of all property transferred to the Trust, valued as of the date of the transfer. The Trustee may pay the annuity amount to one or more members of the class, in equal or unequal shares, as the Trustee, in the Trustee's sole discretion, from time to time may deem advisable. During the Trust term, no payment shall be made to any person other than the Charitable Organization. The annuity period is a term of years. The first day of the annuity period shall be the date the property is transferred to the Trust, and the last day of the annuity period shall be the day preceding the anniversary of that date. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and, to the extent that income is not sufficient, from principal. Any income of the Trust for a taxable year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the Trust assets is incorrectly determined, then within a reasonable period after the value is finally determined for federal tax purposes, the Trustee shall pay to the Charitable Organization (in the case of an undervaluation) or receive from the Charitable Organization (in the case of an overvaluation) an amount equal to the difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.

(OR:)

II. Payment of Annuity Amount.

In each taxable year of the Trust during the annuity period, the Trustee shall pay to , hereinafter called Recipient, an annuity amount equal to $. If Recipient is not an organization described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall instead distribute such payments to one or more organizations described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) as the Trustee shall select, and in such proportions as the Trustee shall decide, from time to time, in the Trustee's sole discretion. The term the Charitable Organization shall be used herein to refer collectively to the organization(s) then constituting the charitable recipient, whether named in this Paragraph or subsequently selected as the substitute charitable recipient. During the Trust term, no payment shall be made to any person other than the Charitable Organization. The annuity period is a term of years. The first day of the annuity period shall be the date the property is transferred to the Trust, and the last day of the annuity period shall be the day preceding the anniversary of that date. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and, to the extent that income is not sufficient, from principal. Any income of the Trust for a taxable year in excess of the annuity amount shall be added to principal.

(OR:)

II. Payment of Annuity Amount.

In each taxable year of the Trust during the annuity period, the Trustee shall pay to , hereinafter called Recipient, an annuity amount equal to % of the initial net fair market value of all property transferred to the Trust, valued as of the date of the transfer. If Recipient is not an organization described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall instead distribute such payments to . If neither nor is an organization described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall instead distribute such payments to one or more organizations described in 26 U.S.C.A. §§ 170(c), 2055(a), and 2522(a) as the Trustee shall select, and in such proportions as the Trustee shall decide, from time to time, in the Trustee's sole discretion. The term the Charitable Organization shall be used herein to refer collectively to the organization(s) then constituting the charitable recipient, whether named in this paragraph or subsequently selected as the substitute charitable recipient. During the Trust term, no payment shall be made to any person other than the Charitable Organization. The annuity period is a term of years. The first day of the annuity period shall be the date the property is transferred to the Trust, and the last day of the annuity period shall be the day preceding the anniversary of that date. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and, to the extent that income is not sufficient, from principal. Any income of the Trust for a taxable year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the Trust assets is incorrectly determined, then within a reasonable period after the value is finally determined for federal tax purposes, the Trustee shall pay to the Charitable Organization (in the case of an undervaluation) or receive from the Charitable Organization (in the case of an overvaluation) an amount equal to the difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.

III. Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. In the taxable year in which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the number of days of the annuity period in that taxable year.

IV. Distribution upon Termination of Annuity Period. At the termination of the annuity period, the Trustee shall distribute all of the principal and income of the Trust (other than any amount due to the Charitable Organization under the provisions above) to .

V. Additional Contributions. No additional contributions shall be made to the Trust after the initial contribution.

VI. Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of 26 U.S.C.A. § 4941(d), as modified by 26 U.S.C.A. § 4947(a)(2), and shall not make any taxable expenditures within the meaning of 26 U.S.C.A. § 4945(d), as modified by 26 U.S.C.A. § 4947(a)(2). The Trustee shall not retain any excess business holdings that would subject the Trust to tax under 26 U.S.C.A. § 4943, as modified by 26 U.S.C.A. § 4947(a)(2) and (b)(3). In addition, the Trustee shall not acquire any assets that would subject the Trust to tax under 26 U.S.C.A. § 4944, as modified by 26 U.S.C.A. § 4947(a)(2) and (b)(3), or retain assets which, if acquired by the Trustee, would subject the Trustee to tax under 26 U.S.C.A. § 4944, as modified by 26 U.S.C.A. § 4947(a)(2) and (b)(3).

VII. Taxable Year. The taxable year of the Trust shall be the calendar year.

VIII. Governing Law. The operation of the Trust shall be governed by the laws of the State of . However, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the requirements for the charitable deductions available for contributions to a charitable lead annuity trust.

IX. Limited Power of Amendment. This Trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the Trust from time to time in any manner required for the sole purpose of ensuring that the annuity interest passing to the Charitable Organization is a guaranteed annuity interest under 26 U.S.C.A. §§ 170(f)(2)(B), 2055(e)(2)(B), and 2522(c)(2)(B) and the regulations thereunder.

IX. Investment of Trust Assets. Except as provided in Paragraph VI herein, nothing in this Trust instrument shall be construed to restrict the Trustee from investing the Trust assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of Trust assets.

XI. Retained Powers and Interests. During the Donor's life, , the Trustee, or a disqualified person as defined in 26 U.S.C.A. § 4946(a)(1) shall have the right, exercisable only in a nonfiduciary capacity and without the consent or approval of any person acting in a fiduciary capacity, to acquire any property held in the Trust by substituting other property of equivalent value.

WITNESS our signatures as of the day and date first above stated.

By:

Acknowledgments (form of acknowledgment may vary by state)

Attach Schedule A

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What a Charitable Lead Trust Is and how it works

A Charitable Lead Trust (CLT) is an irrevocable trust that pays a fixed dollar amount or percentage of trust assets to one or more charities for a defined term, with the remaining assets passing to noncharitable beneficiaries (often family) at the end of that term. CLTs are estate- and gift-planning tools used to provide sustained charitable support while potentially reducing estate and gift tax exposure; common forms include charitable lead annuity trusts (CLATs) and charitable lead unitrusts (CLUTs).

Primary reasons planners choose a Charitable Lead Trust

CLTs can lower taxable estate value, deliver predictable funding to charities, and transfer future appreciation to heirs with potential gift- and estate-tax advantages. They also permit flexible structuring of payment terms, choice of charitable recipients, and post-term remainder planning.

Primary reasons planners choose a Charitable Lead Trust

Typical people and organizations that use Charitable Lead Trusts

Charitable Lead Trusts are most often used where long-term charitable support and intergenerational wealth transfer are both priorities.

  • High-net-worth individuals and families seeking estate tax reduction and legacy gifting over multiple years.
  • Trustees and wealth managers administering complex asset transfers and coordinating tax reporting.
  • Philanthropic organizations and private foundations receiving reliable, term-limited income streams.

Legal counsel and tax advisors typically participate to document trustee powers, tax treatment, and to ensure compliance with applicable federal and state rules.

Core parts of a professional Charitable Lead Trust document

A well-drafted CLT clearly defines the charitable payment stream, the trust term, trustee powers, funding sources, remainder beneficiaries, and tax provisions to align charitable intent with estate planning objectives.

Trust Type

Specify CLAT (fixed annuity) or CLUT (variable unitrust) to define how annual payments to charity are calculated and adjusted.

Charitable Term

State term length (years or life interest) and termination conditions so charity payments and timing are unambiguous for trustees and beneficiaries.

Income Payments

Define payment amount or percentage, schedule (annual/quarterly), measurement date, and method for asset valuation prior to distributions.

Remainder Beneficiaries

Identify who receives the remainder (individuals, trusts, or entities), and any contingent remainder provisions in case primary beneficiaries predecease distribution.

Funding Assets

List permissible funding sources (cash, securities, real estate), transfer mechanics, and any asset valuation or appraisal requirements.

Tax Provisions

Include trustee duties for tax reporting, election choices (grantor vs non-grantor treatment), and clauses addressing substantiation for charitable deductions.

Essential data fields required on the Charitable Lead Trust

Grantor Name: Full legal name
Trustee Name: Individual or corporate trustee
Charity Details: Name and EIN
Term Dates: Start and end dates
Payment Terms: Dollar or percentage amount
Remainder Beneficiaries: Names and shares

Who typically signs or authorizes a Charitable Lead Trust

Grantor

The person establishing the trust signs to create trust obligations and transfer assets; their signature and tax identifiers must match trust funding documents and tax filings to avoid gift or withholding issues.

Trustee

A named trustee (individual or corporate) signs to accept fiduciary duties; trustee acceptance language and any delegation powers should be explicit to ensure enforceability and clear administration.

Step-by-step: completing the Charitable Lead Trust document

Follow these sequential steps to prepare, execute, and fund a Charitable Lead Trust with clear records for tax and probate purposes.

  • 01
    Draft terms: Define CLAT or CLUT, payment formula, term, and remainder recipients.
  • 02
    Select trustee: Name an individual or corporate trustee and confirm acceptance.
  • 03
    Execute properly: Sign before required witnesses and notary or use allowed RON procedures.
  • 04
    Fund the trust: Transfer assets and record transfers with trustee logs.

Configure an online completion workflow for a Charitable Lead Trust

Set digital fields, authentication, and routing so signers, trustees, and charities receive the correct documents in order.

Online fields and workflow settings Signature fields | Required for each signer
Signature Authentication Email + SMS code | Moderate assurance
Conditional Fields Show remainder fields | When noncharitable beneficiary selected
Notarization option RON or in-person | Select per state rules
Routing order Grantor → Trustee → Charity | Sequential approval

Where to send and file the executed Charitable Lead Trust

Execution and recordkeeping steps determine legal and tax effect; follow the sequence below to complete administration.

  • Execute document: Grantor and trustee sign before required authentication or notary.
  • Record acceptance: Trustee files acceptance in trust records and ledger.
  • Transfer assets: Fund trust accounts and document transfer receipts.
  • Provide charity notice: Send executed trust summary and payment instructions to charity.

Digital signing and file format considerations for CLTs

Use secure PDF or DOCX templates and authenticated eSignature workflows to capture intent, attribution, and an audit trail for trust execution.

  • File Formats: PDF or DOCX recommended for retainable, tamper-evident records
  • Integrations: Link storage to Box, Google Drive, or NetSuite for records
  • Authentication: Use multi-factor or RON where state-required

Preserve a complete audit trail (timestamps, IP, signer email) and store signed originals in secure, access-controlled storage to support tax reporting and potential probate review.

Key timing and filing deadlines to track

Maintain a calendar for execution, funding, and annual tax filing dates to avoid missed distributions or reporting penalties.

Effective date and funding:

Execute and fund according to trust terms and trustee instructions.

First distribution date:

Pay charity on the scheduled date specified in the trust.

Annual trust return:

Trust tax return (Form 1041) generally due April 15 for calendar-year trusts.

Gift tax reporting:

File Form 709 by April 15 if a taxable gift occurrence applies.

Charity substantiation:

Retain written acknowledgements consistent with IRS substantiation rules.

Milestone timeline for creating and operating a CLT

Follow these sequential milestones from drafting through final remainder distribution to maintain compliance and records.

01

Draft and Execute

Prepare trust instrument and obtain required signatures and notarization.

02

Fund the Trust

Transfer specified assets into trustee-controlled accounts and log transactions.

03

Make Periodic Distributions

Trustee issues payments to charity as scheduled with accounting records.

04

Distribute Remainder

At term end, trustee transfers remainder to designated beneficiaries per trust terms.

Common mistakes to avoid when preparing a Charitable Lead Trust

  • Failing to fund the trust promptly after execution can nullify intended tax and estate planning benefits and create administrative disputes with beneficiaries.
  • Using vague payment language (for example, 'reasonable amount') instead of fixed formulas or percentages creates trustee discretion and possible litigation.
  • Omitting the charity’s EIN or using an incorrect legal name can prevent the recipient organization from issuing proper charitable acknowledgements required for donor tax substantiation.
  • Neglecting state-specific notarization or witness rules, including RON eligibility, risks later challenges to the trust’s validity or enforceability.

Potential penalties and legal risks from errors

Gift Tax Error: Possible gift tax and interest
Trust Tax Penalty: Late or incorrect Form 1041 filings
Deduction Disallowance: Charitable deduction risk on audit
Invalid Execution: State formalities may void instrument
Fiduciary Liability: Trustee breach claims and damages
Information Penalties: Reporting penalties under IRC provisions

Representative eSignature vendor comparison for signing trust documents

Below are common pricing and capability comparisons to consider when choosing an eSignature provider for trust execution; signNow appears first per vendor listing requirements.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by vendor Varies by vendor Varies by vendor Varies by vendor
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No cap 100 envelopes/user/year Varies Varies Varies

Frequently asked questions about Charitable Lead Trusts

Answers to common practical questions about validity, tax reporting, signatures, and post-execution changes for Charitable Lead Trusts.


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