A grantor charitable lead trust (“GCLT”) provides the grantor (donor) with an immediate income tax deduction for the charitable portion of the gift. In return for such deduction, however, the income the trust generates each year will be taxed back to the grantor, and neither the trust nor the grantor will receive income tax deductions for the amounts paid annually by the trust to charitable organizations.

Generally, at the end of the trust term, the assets in the trust will revert back to the grantor. A GCLT can be set up as a unitrust or an annuity trust.

A GCLT may be attractive for those who have higher than normal income in one year and are in need of the income tax deduction to offset the extra taxable income, yet who expect to have lower income in future years. Under that scenario, the taxation of income back to the grantor in future years may be worth it in light of the income tax deduction received in the year of contribution.