A Sept. 17 report from 24/7 Wall St. put renewed attention on a niche estate-planning tool: the charitable lead annuity trust, or CLAT. The structure, sometimes called the “Jackie O. trust,” is designed to pay charity first for a set term and pass the remainder to heirs, potentially with a very low taxable gift at the time the trust is funded.
For affluent families, especially those with concentrated, fast-appreciating assets, the story matters because the tax result hinges on one of the oldest rules in transfer-tax planning: the IRS values the gift only once, using the Section 7520 rate in effect when the trust is created. If the trust assets grow faster than that assumed rate, the excess appreciation may end up with heirs without additional gift or estate tax, according to the report.
What Changed
The immediate development was not a new IRS rule or a legislative change. Instead, the report highlighted the Walton family’s reported use of CLATs to move wealth to younger generations while directing a stream of payments to charity. That brought a highly technical trust structure back into public view at a time when wealthy families are revisiting estate plans under a larger 2026 federal exclusion amount.
Under the description cited by 24/7 Wall St. and mirrored by AOL, a CLAT is an irrevocable trust. The grantor transfers assets into the trust, the trust pays a fixed annuity to one or more charities for a specified number of years, and whatever remains at the end goes to children or to trusts for their benefit. The key tax point is that the taxable gift is based on the present value of the remainder interest at funding after accounting for the value of the charitable annuity stream.
That is why some planners structure a CLAT so the remainder interest is very small at inception. If the assets later outperform the IRS’s assumed rate, that excess growth can pass to heirs outside the grantor’s taxable estate.
Who Is Affected
This is a planning tool for a narrow slice of households. The report says federal law gives each individual a basic estate exclusion of $15,000,000 for decedents dying in 2026, up from $13,990,000 in 2025. Families below that level may not face federal estate tax at all, which means a CLAT could add cost, legal complexity and a real charitable commitment without solving a federal transfer-tax problem.
By contrast, the structure may be relevant for families with three traits:
- Estates well above the federal exclusion.
- Assets expected to appreciate significantly.
- Actual charitable intent, since the annuity payments go to charity first.
The report specifically points to concentrated founder stock as a classic CLAT asset. The rationale is straightforward: if a family believes a concentrated holding can grow meaningfully over time, growth above the Section 7520 assumption may shift to heirs with little additional transfer-tax cost.
The “Jackie O.” nickname also got a reality check. The report says Jacqueline Kennedy Onassis’s 1994 will directed a testamentary CLAT with a 24-year charitable lead for the benefit of grandchildren, but estate-administration accounts indicate the trust was not ultimately carried out as drafted. In other words, the nickname comes from a famous design, not necessarily a famous completed transaction.
The After-Tax Math
The article’s core tax idea is that a CLAT works best when trust assets beat the IRS hurdle rate. That hurdle is tied to the Section 7520 rate, which the report says is published monthly and derived from Treasury-linked mid-term rates. In a higher-rate environment, more of the trust’s return is needed just to clear the assumed growth rate before heirs receive meaningful value.
The same report notes that the 10-year Treasury yield closed at 5.00% on Sept. 15, 2026, its high for the year. While that is not the same figure as the monthly Section 7520 rate, it helps explain why planners may find the setup less attractive than in very low-rate periods.
Example: A family contributes $20 million of concentrated stock to a CLAT. The trust is set up to make fixed annuity payments to charity for a term of years, and the present value of those charitable payments is structured to absorb nearly all of the initial contribution for gift-tax valuation purposes. If the stock merely tracks the IRS assumption, little may be left for heirs at the end of the term. If the stock substantially outperforms that assumption over time, the excess appreciation may pass to heirs without additional gift or estate tax.
That example is only directional because the exact result depends on the monthly Section 7520 rate, the annuity amount, the trust term, investment performance and whether the trust is structured as a grantor or non-grantor CLAT.
| Factor | Why It Matters |
|---|---|
| Section 7520 rate at funding | Sets the IRS assumed return used to value the remainder gift |
| Asset performance | Growth above the assumed rate may pass to heirs tax-efficiently |
| Annuity obligation | Must be paid to charity on schedule regardless of investment results |
| Trust term | Longer terms can change both gift value and mortality risk |
What to Consider Before Using One
The main risk is simple: the charity gets paid first no matter what. If trust assets underperform, heirs may receive little or nothing at the end of the term. That makes a CLAT very different from strategies that preserve more flexibility for family wealth.
The report also notes several design trade-offs. In a grantor CLAT, the grantor pays income tax on trust earnings during the term, which can further reduce the taxable estate and let trust assets compound without that tax drag inside the trust. But the report says the grantor does not receive ongoing income-tax charitable deductions for each annuity payment beyond an upfront deduction at funding. In a non-grantor CLAT, the trust pays its own tax and takes the charitable deduction, but the grantor loses that so-called tax-burn feature.
Mortality risk matters too. According to the report, if the grantor dies during the term of a grantor CLAT, part of the trust may be pulled back into the estate. Because the trust is irrevocable and the documentation must align with beneficiary designations, titling and the will, households considering this technique often discuss it with an estate-planning attorney and a CPA before moving assets.
What to Watch
The next question is whether rate conditions become more favorable. CLAT economics are generally more compelling when the IRS assumed rate is lower, because more actual asset growth can clear the hurdle for heirs. If Treasury-linked rates stay elevated, the strategy may remain harder to justify except for families with unusually strong appreciation expectations and durable charitable goals.
It is also worth watching whether public reporting produces more detail on how ultrawealthy families are using charitable lead trusts in practice. For most readers, though, the broader takeaway is narrower than the headlines suggest: a CLAT is not a mainstream estate tool. It is a specialized structure for very large estates, concentrated assets and families willing to commit real dollars to charity before any remainder reaches heirs.
Sources
- First reported The Waltons Are Moving Billions to the Next Generation Through a Trust Named After Jackie Kennedy’s Will. It Pays Charity First, the Heirs Second, and the IRS Close to Nothing — 24/7 Wall St.
- Waltons moving billions to next generation through a trust named after Jackie Kennedy's will — AOL
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
