Charitable Lead Trust (CLT) Calculator

A charitable lead trust (CLT) is the mirror image of a charitable remainder trust: instead of paying you now and leaving the remainder to charity, it pays charity first for a term of years or a lifetime, then passes whatever's left to your family. The appeal is a gift-and-estate-tax discount. Because charity is getting paid first, the IRS values the family's remainder interest at less than the full contribution, which can shrink the taxable gift substantially, sometimes to zero.

Like a charitable remainder trust, a CLT can be structured as an annuity trust (CLAT, a fixed payment to charity) or a unitrust (CLUT, a percentage revalued each year). This calculator models a non-grantor CLT, the more common structure for the estate/gift-tax planning this tool focuses on, and shows both the taxable gift value today and the payout rate that would reduce it all the way to zero.

How does this calculator work?

Choose CLAT or CLUT and the trust's term (one life, two lives, or a fixed number of years), and enter the IRS §7520 rate for the month of the gift. This is what values the charity's lead interest and, by extension, the taxable gift to your family.

Enter the contribution amount, the lead payout rate to charity, and your own assumption for the trust's actual investment growth rate, which is intentionally kept separate from the §7520 rate: the gap between the two is the source of the CLT "estate freeze" effect.

The calculator computes the taxable gift value and shows the exact lead payout rate that would zero it out, the classic CLAT planning question, then projects the trust year by year to show what's actually left for your family at your assumed growth rate versus what was reported to the IRS at the §7520 rate.

Worked example

A 10-year term-certain CLAT funded with $1,000,000, paying charity a fixed 6% annually, at a 5% §7520 rate with 7% assumed trust growth.

Taxable gift value

$536,696 (53.67% of the contribution)

Charitable gift-tax deduction

$463,304

Zero-out payout rate

12.950%

Fixed annual payment to charity

$60,000/yr for 10 years

Projected remainder to heirs (at 7% growth)

$1,138,164

How the numbers work

At a 6% payout rate, the IRS values charity's 10-year lead interest highly enough that only 53.67% of the $1,000,000 counts as a taxable gift to the family. The rest is treated as passing to charity, not to heirs, for gift-tax purposes.

Raising the payout rate to about 12.95% would have the IRS value charity's claim on the trust as equal to the entire contribution, reducing the taxable gift to essentially $0: a fully "zeroed-out" CLAT, a common target in CLAT planning.

Meanwhile, because this example assumes the trust actually grows at 7% while the IRS values it using the 5% §7520 rate, the family ends up with $1,138,164 after 10 years of $60,000 annual payments to charity, more than the entire original contribution and far more than the $536,696 that was reported as a taxable gift. That gap is the "estate freeze" arbitrage: the family benefits from real growth above the IRS's assumed rate, without being taxed on it.

A CLT's tax efficiency comes entirely from the spread between the §7520 rate used to value the gift and what the trust actually earns. The more growth outpaces the §7520 rate, the more value passes to family tax-efficiently, which is why low-§7520-rate periods are historically when CLATs are most attractive.

Zeroing out the taxable gift isn't free: it requires a higher payout rate to charity, which leaves less inside the trust to compound for the family. There's a real trade-off between minimizing gift tax today and maximizing what's ultimately left for heirs.

The opposite structure, taking the income yourself now and leaving charity the remainder, is a charitable remainder annuity trust or its unitrust sibling, and the underlying IRS remainder factors can be checked directly. If you want an immediate deduction without a trust at all, a donor-advised fund is the simpler alternative.