Charitable Lead Trusts

A charitable lead trust is a trust that the estate owner establishes either during life or at death. The income from the trust flows to a charitable organization, like Providence Hospitals, typically for a stated number of years. After that period, the assets inside the trust are then distributed. The fact that the assets will one day be transferred to another person means that this trust has one further distinction: it is a "nongrantor" trust, as opposed to a grantor trust. "Nongrantor" means the trust assets are not owned by the person who established the trust, and the assets are not going to be returned to him or her someday. (A "grantor" trust is one in which the assets will eventually be distributed back to the donor. As a result, the donor is subject to tax on the assets.) Charitable lead trusts are often used by donors as an estate planning tool. Creating a charitable lead trust may allow a donor to make a gift to Providence Hospitals while passing a substantially larger inheritance to his or her heirs than could be left using various traditional planning mechanisms.