Charitable lead trust (CLT) is an estate-planning vehicle in which a trust pays an income stream to one or more charities for a specified term, after which the remaining assets pass to noncharitable beneficiaries, often family members. The structure can reduce gift or estate tax on the remainder interest, particularly when assets are expected to appreciate faster than the discount rate used in valuation. CLTs come in grantor and nongrantor forms, each with different income-tax consequences. They are often funded with appreciated assets and may be used alongside life insurance to replace wealth given to charity or to equalize inheritances.

Advisors introduce charitable lead trusts to philanthropically inclined clients who want to support charities meaningfully during life while ultimately transferring assets to heirs at a reduced transfer-tax cost. They work with estate-planning attorneys to select annuity or unitrust payout structures, term lengths, and beneficiaries. In some cases, life insurance on the grantor or heirs is used as a wealth-replacement tool outside the CLT. Advisors coordinate with CPAs to model income-tax effects for grantor versus nongrantor designs. Understanding charitable lead trusts allows advisors to integrate charitable intent and multigenerational wealth planning in a single strategy.