Charitable planning · comparison
Charitable Lead Trust vs. Charitable Remainder Trust
Updated 2026-10-21 · Gregory Garone, CEPA®
Short answer: The two are mirror images. A lead trust pays charity first and passes the remainder to family, which makes it mainly an estate and gift tax tool. A remainder trust pays you first and passes the remainder to charity, which makes it mainly an income and capital gains tool.
Charitable lead trust vs. Charitable remainder trust, side by side
| Question | Charitable lead trust | Charitable remainder trust |
|---|---|---|
| Paid first | Charity, for a term of years | You or other individuals, for life or a term of years |
| Receives the remainder | Family or other beneficiaries | Charity |
| Main tax benefit | Reduces the taxable value of what passes to heirs | Defers capital gains and creates a partial income tax deduction |
| Effect of a low 7520 rate | Favorable: more can pass to heirs at a lower gift value | Less favorable for annuity trusts: a smaller remainder deduction |
| Is the trust itself taxed? | Depends on grantor or non-grantor design | Generally exempt from income tax |
When each one tends to fit
Charitable lead trust may fit when
- You already give a steady amount to charity each year.
- You want to pass appreciating assets to family with less gift or estate tax.
- You do not need income from the assets during the trust term.
Charitable remainder trust may fit when
- You want income from an appreciated asset you are about to sell.
- Your heirs are otherwise provided for.
- Charity is the intended final recipient.
An example
Illustration only: if a lead trust pays charity a fixed amount for 15 years and the trust’s investments earn more than the Section 7520 rate in effect when it was funded, the excess growth passes to children free of further gift tax. If the investments earn less, family receives less than projected. The 7520 rate is set monthly, which is why timing matters.
Questions to bring to your CPA or advisor
- Is the primary goal income for us, or a tax-efficient transfer to the next generation?
- Which month’s 7520 rate applies, and how sensitive is the result to it?
- Should the lead trust be a grantor trust so we take an up-front deduction?
- What happens if trust returns fall short of the assumptions?
Common questions
What is the Section 7520 rate?
An IRS interest rate published monthly that is used to value the charity’s and the family’s shares in split-interest trusts.
Can I be both the income beneficiary and the remainder beneficiary?
No. In a remainder trust the remainder must go to charity, and in a lead trust the lead payments must go to charity.
Do I get an income tax deduction for a charitable lead trust?
Only with a grantor lead trust, and then you are taxed on the trust’s income each year. A non-grantor lead trust gives no personal deduction but the trust deducts its charitable payments.
Are these trusts revocable?
No. Both are irrevocable once funded, so the terms deserve careful review before signing.
Sources and limitations
More comparisons
Weighing this choice for real?
Tell us what you are deciding and when. Greg will reply personally.
Submitting a question does not begin an advisory relationship.