Charitable Lead Annuity Trust Planning: Two Strategies for a “Zeroed Out” CLAT with Lathrop & Gage
Note: MO Bar CLE 1.2 hours | KS Bar CLE 1.0 hours
A Charitable Lead Annuity Trust (“CLAT”) is an effective estate planning tool to fund a family’s charitable desires while passing assets to the family at the end of the CLAT term free of gift tax or estate tax.
One strategy funds a zeroed out CLAT with preferred units of a Limited Liability Company. The preferred units have a coupon rate (such as 7.5%) determined by a qualified appraiser, which generates annual cash flow to the CLAT. The annual annuity payment from the CLAT to the family charity equals the preferred dividend distribution. At the end of the charitable term, the preferred units pass to a family trust free of transfer tax.
A second CLAT strategy is used at death to pass business interests to family trusts without transfer tax and cash and a promissory note to the zeroed out CLAT. The family trust buys the business interests from the decedent’s estate for cash and a note. The decedent’s estate plan transfers the cash and promissory note to the zeroed out CLAT.
Jim Betterman: As the Co-Leader of Lathrop & Gage’s Wealth Strategies practice, Jim Betterman focuses his practice on trust and estate planning. He regularly counsels high net worth families and their family offices on complicated matters. Mr. Betterman guides owners of closely held businesses through succession planning as well as tax planning. He has actively engaged in charitable planning including the creation and funding of substantial supporting organizations and private foundations, as well as charitable remainder trusts, charitable lead trusts and charitable gift annuities. He is actively involved in the settlement and litigation of trust and estate disputes among family members, trustees and beneficiaries. Mr. Betterman has been selected for Missouri/Kansas Super Lawyers, 2006-2014, and among The Best Lawyers in America®, 2005 – 2015. He is a Fellow of the American College of Trust and Estate Counsel (ACTEC).
Joe Growney: Joe Growney concentrates his practice in all areas of estate planning, including the preparation of basic and complex estate planning documents, and the implementation of sophisticated planning techniques. He also assists high net worth individuals and closely-held businesses with business succession planning and tax planning, including the formation of corporations, partnerships and limited liability companies, and structuring of corporate reorganizations and recapitalizations. Mr. Growney regularly assists clients with life insurance planning, charitable planning and estate planning with retirement benefits.
Courtney Conrad: Courtney Conrad focuses her practice in the area of estates and trusts law. She has experience in basic estate planning and sophisticated estate planning, as well as tax planning for high net worth individuals. Ms. Conrad assists clients with charitable planning, including the formation and administration of charitable entities and trusts. She also has experience in wealth preservation and business succession planning, as well as estate and trust administration