Lead Trusts – The Final Frontier?!

I can’t tell you how many times I hear consultants or financial planners talk boldly about charitable lead trusts (“lead trusts” or “CLTs”). In fact, I have heard of consultants telling starry eyed clients how lead trusts are going to play a “big role” in their upcoming campaign.  Even going so far as to suggest that you can count on a certain percentage of dollars coming via lead trusts.
Wow – there must have been an explosion of lead trusts on the scene in the last 10 to 15 years – or at least that is what people seem to indicate.
If you ever hear a consultant or financial advisor talk big like this about lead trusts, put them on the spot and ask:  How many lead trusts have you been directly involved with? Ask for a specific number!  Don’t be surprised if they admit to never having had any direct role with one in their entire careers.  (I had direct roles in 3 CLTs that actually came to fruition over close to 20 years and that is more than most).
Look at this slide!  The numbers are right from IRS statistics on split interest trusts.  It is a chart showing the number of lead trusts in existence per year between 2001 and 2012.  This was based on the number of tax returns filed (all lead trusts must file annual tax returns).Lead Trusts slideThese numbers are NOT new CLTs a year – they are the number of such trusts in existence each tax year.  This means the annual number includes existing CLTs from previous years plus new CLTs minus ended CLTs.  The biggest jump on this chart was between 2001 and 2002 of around 700 more.  2012 and 2010 saw drops in the actual numbers of CLTs.

Just as a frame of reference, there were over 100,000 CRTs in existence in 2012.  My guess is that CGAs might be in the millions.  

In other words, CLTs are rarely done.  Most fundraisers, consultants and even professional advisors have never been directly involved with them.   

The bottom line with CLTs – they are not easy to make happen.  Charities can not do them for their donors. Advisors are generally clueless with the actual details.  And, it is basically looking for a needle in a haystack to see one of these happen.  You need the right donors, the right funding assets, the right advisors, etc… (look at previous posts on lead trusts for more on why they are so difficult).  

Ok, there you have it.  CLTs are a rarity.  

Of course, you want to know about them and that’s why CLT topics on this blog get more hits than most other topics

So, if you have made it this far, stay tuned for an upcoming webinar training opportunity we will be offering readers on lead trusts. 

And, if your high paid consultant starts counting your future CLT revenue, take him or her to task.  Maybe he or she is willing to make their fees be contingent on that CLT revenue they are going to find for you?

2 comments

  1. I have found that a lot of gift officers and advisors don’t understand CLTs enough to know how powerful they are (or even how they work). And many of those who do actually understand CLTs get so involved in explaining the mechanics that the clients / donors become overwhelmed. Could that be why we see so few?

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