Why Use a CLT?
The planning intent of a CLT is to use what the client hopes will be a positive difference between the actual rate of return on the trust assets and the “7520 Rate” to achieve a tax-favored transfer of assets to non-charity beneficiaries. Each month the IRS determines minimum interest rates that must be charged on short-term (less than 3 years), mid-term (3-to-9 year), and long-term (more than 9 year) loans between related persons to avoid the imputation of a gift to the transaction. The 7520 Rate in any month is 120% of that month’s mid-term rate. When reporting a CLT to the IRS, the taxpayer may use the lowest among the 7520 Rates for the month of the CLT’s creation and the two prior months. Planning Tip: CLTs are particularly suited for hard-to-value assets (such as real estate or family limited partnership or limited liability company interests). Planning Tip: Fund a CLT with discounted interests in a family limited partnership or limited liability company. Doing so will increase t
