Donors contribute stock to a donor advised fund and receive an immediate federal income tax charitable deduction, reducing their net worth for estate tax purposes and retaining the right to recommend grants from the DAF to museums and their other favorite charities.

Nonprofits nationwide are sounding the alarm over IRS' attempt to loosen restrictions on churches' political involvement. As of this publication, more than 1,500 organizations have signed a letter (Letter) urging President Trump and IRS to preserve the longstanding prohibition on houses of worship engaging in political campaign activities.

In the thirteenth chapter of Visual Planned Giving: An Introduction to the Law & Taxation of Charitable Gift Planning, author Russell James explains charitable lead trusts or CLTs and the rules governing them. While CRTs pay the donor first with the remainder passing to charity, CLTs pay the charity first, with the remainder passing to the donor's selected beneficiaries. CLTs are typically used to generate estate and gift tax deductions. Though they are less common than CRTs, donors usually fund CLTs with larger amounts of the assets. Because the charity is the income beneficiary, CLTs cannot offer variations such as the NIMCRUT or Flip-CRUT. A CLT is not a tax-exempt entity, unlike a CRT.

There are two types of CLTs: the grantor CLT and the nongrantor CLT. The former allows for immediate income tax deductions, while the latter does not. Because the CLT is not a tax-exempt entity, the income tax deduction for transfers to a grantor CLT is limited to 30% of adjusted gross income, or 20% if funded with appreciated property. The grantor CLT is frequently used to accelerate deductions in situations where the donor will have an income spike, such as with the sale of an appreciated asset or a Roth IRA conversion. The negative to the grantor CLT is income earned by the trust during its existence is taxed to the donor, and there are no income tax deductions for distributions to charity. On the other hand, the nongrantor CLAT does not generate an immediate income tax deduction, but the income is taxed to the trust, and the trust is permitted to deduct distributions to charity.

The typical CLT reduces estate taxes. However, a grantor CLT can be structured for a donor to take an immediate deduction for gifts to charity, with the remainder reverting to the grantor. Because the donor is treated as the trust's owner, he or she receives an income tax deduction when the trust is created but is taxed on the trust's income. The trust's assets are owned by the donor for gift and estate tax purposes.

One variation on this design is to create a CLT combining the benefits of the grantor and nongrantor CLT, where the CLT is a grantor trust for income tax purposes but not for estate tax purposes. For example, a donor could retain the right to substitute other property for the trust's property, resulting in grantor trust treatment for income taxes, but not for gift and estate taxes. This gives the donor an immediate deduction, allows trust assets to grow more quickly because the income is taxed to the donor (not the trust), and keeps the remainder out of the donor's estate.

A grantor CLT does not have issues with unrelated business income tax, because all income is taxed to the donor. Moreover, it can hold S-Corporate shares. The nongrantor CLT cannot do so, and its distribution deduction is limited (and thus the trust may be taxed) when it distributes unrelated business taxable income to a charity.

A Flip CRUT allows the donor to diversify assets, avoid capital gains tax, and defer the income stream.