Charitable Lead Annuity Trust Planning Tip

For those clients with a large spike in income, establishing a grantor CLAT in the same year will generate an immediate charitable income tax deduction that can offset the spike in income. Taking the deduction in the first year and reporting as the taxpayer's own the CLT's income each year during the CLT's term thus has the effect of spreading the taxpayer's spike in income earned in the first year over the term of the CLT.