Practice Quiz

Financial Planner

Category - Estate Planning

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What is the distinguishing feature of charitable lead trusts?
  1. They can hold tax-exempt securities.
  2. Additional contributions are not allowed.
  3. Must invade corpus when income is insufficient for payout.
  4. The donor in the charitable lead trust gives away an income stream and receives a remainder interest.
Explanation
Answer: D - The distinguishing feature of charitable leads trusts is that the donor in the charitable lead trust gives away an income stream and receives a remainder interest. The donor places income-producing property in a reversionary trust and directs that the trust income be transferred to a designated charity for a period of time not to exceed 20 years. At the end of this “lead” time, the property reverts to the donor or to some other non-charitable beneficiary.
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