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Grow Your AUM.
Keep It Through Every Cycle.
An Optimized CLAT lets your high-net-worth clients move money you manage into a protected, tax-advantaged account built to ride out many market cycles. Over a 15–30 year period, long-term growth and tax-free compounding do the heavy lifting — and the assets stay under your management the whole time.
The Income-Tax Edge Advisors Overlook
The CLAT has been in the tax code since 1969, yet only about 5% of charitable trust filings are CLATs. For years it was seen as an estate- and gift-tax tool for the ultra-wealthy. The peer-reviewed analysis below argues the opposite: it's the income-tax benefits that make the Optimized CLAT so appealing — for the “working rich” and the ultra-wealthy alike.
“The CLAT’s income tax benefits (which have largely gone overlooked by advisors) can make the CLAT attractive to both the ‘working rich’ and ultra-wealthy, alike.”Morrison, Metzner & Siegle · Estate Planning Journal (Thomson Reuters), Cover Article, Sept. 2020
For an advisor, that overlooked edge is a growth engine. A client can fund a new Optimized CLAT year after year — “racked, stacked, and rolled” — wiping out up to 30% of their taxable income each year, while every dollar they put in stays invested under your management for decades.
How the OCLAT Grows Your AUM
Because the OCLAT locks money up for the long term, it leans on long-term growth and tax-free compounding to get through downturns. Four built-in features make it a durable, cycle-proof source of assets you manage.
The 1-3-5 / ~8% figures are illustrative rules of thumb; actual results depend on investment performance and the §7520 rate locked at funding, may be negative in any year, and are not guaranteed.1
One $1M Funding, Decades of AUM
From the peer-reviewed article: Joe, a 45-year-old attorney earning $3M (his spouse Sheila earns $500K), funds an Optimized CLAT with $1,000,000 — about 30% of his income — simply by transferring stocks from his brokerage account. He claims a $1,000,000 deduction (about $370,000 saved on taxes right away) and, as the trust’s investment manager, keeps managing the money. He picks a 30-year term with the payments pushed toward the end (the most the IRS allows), so the charitable payouts stay small for years and the assets keep growing.
| Year | Annuity to Charity | CLAT Value (AUM) |
| 0 · Funding | — | $1,000,000 |
| 5 | ($2,157) | $1,311,717 |
| 10 | ($5,366) | $1,710,596 |
| 15 | ($13,353) | $2,205,713 |
| 20 | ($33,226) | $2,781,018 |
| 25 | ($82,677) | $3,345,565 |
| 30 · Term end | ($205,726) | $3,605,715 |
| Total to charity (nominal) | $1,229,155 | |
| Net to beneficiaries | $3,605,715 | |
Selected years from the article’s Exhibit 1, based on JPMorgan Private Bank long-term aggressive growth assumptions (6.3% total return, including volatility). Backloading keeps ~$1,000,000 of the $1,229,155 in charitable payments out of the first 23 years — so the assets stay invested and under management.2
Across the article’s scenarios, funding the CLAT roughly triples what passes to Joe’s heirs versus doing nothing ($859,799 vs. $2,766,297, all else equal), and Exhibit 2 shows $3,024,067 of value added by the CLAT once the tax and estate benefits are combined. For the advisor, the takeaway is simpler: one funding decision turns $1M into decades of growing, protected, fee-generating assets under management.
Roth IRA vs. 401k vs. OCLAT
You already know the Roth and 401(k). Here's why the OCLAT plays in a completely different league — especially for wealthy families who want to give and grow at the same time.
| Compare |
OCLAT
Optimized Charitable Lead Annuity Trust
|
Roth IRA
Individual Retirement Account
|
401(k)
Employer-Sponsored Retirement Plan
|
| Feature | OCLAT | Roth IRA | 401(k) |
| Contribution limit | No limit — $1M, $10M, $100M+ | $7,000/year ($8,000 if 50+) | $23,500/year ($31,000 if 50+) |
| Income eligibility | No income restriction | Phased out above $161K (single) / $240K (married) | No limit, but employer plan required |
| Upfront tax deduction | Yes — dollar-for-dollar, up to 30% AGI | None — contributions are after-tax | Yes — pre-tax contributions reduce taxable income |
| Tax-free growth | Yes — grows inside trust for 15–30 years | Yes — grows tax-free inside account | Tax-deferred — taxed upon withdrawal |
| Tax-free transfer to heirs | Yes — remainder passes estate-tax-free | Partial — inherited Roth must be withdrawn within 10 years | No — fully taxable to heirs as ordinary income |
| Asset protection | Immediate — creditor-proof from day one | Varies by state; limited federal protection | Federal ERISA protection from creditors |
| Estate tax impact | Removes assets from taxable estate entirely | Roth balance is included in taxable estate | Balance included in taxable estate |
| Charitable impact | $1M contribution → $3M+ to charity over term | None — no charitable component | None — no charitable component |
| Family wealth after 30 years | $5M+ returned tax-free (from $1M) | ~$210K at 8% growth (from $7K/yr, 30 yrs) | ~$705K at 8% growth (from $23.5K/yr, 30 yrs, pre-tax) |
| Generational wealth transfer | Dynasty trust capable — multi-generation | 10-year drawdown rule for non-spouse heirs | 10-year drawdown rule + taxed as income to heirs |
Built to Outperform
Put the OCLAT next to the accounts your clients already have. It has no contribution or income limits, gives a deduction up to 30% of income, grows tax-free, passes on estate-tax-free, and is protected from creditors from day one — a mix no single retirement account offers.
“When the tax and economic benefits are considered together, the Optimized CLAT has the power to outperform nearly all other traditional investment vehicles.”Morrison, Metzner & Siegle · Estate Planning Journal (Thomson Reuters), Sept. 2020
A 401(k) limits contributions to about $23,500 a year and taxes heirs as regular income. A Roth IRA caps out at $7,000 and disappears entirely above moderate incomes. The OCLAT has no contribution limit, no income test, and returns several times the contribution to the family free of gift and estate tax — while the charity gets more, not less.
Put an OCLAT to Work for Your Book
We design and fund every OCLAT ourselves, working with you and your client’s tax advisor. Ask for a personalized model for a specific client — no cost, no commitment.
From our Press
How advisors are using the OCLAT to help the next generation of affluent clients give and grow at once.
Source, Assumptions & Disclosures
- 1-3-5 rule & ~8% assumption. The “$1M → ~$5M at year 30” rule of thumb is illustrative and assumes an ~8% average annual return net of the charitable annuity. Returns will be higher or lower, may be negative in any year, and are not guaranteed; the remainder depends on actual performance and the §7520 rate locked at funding.
- Exhibit figures. Exhibit 1 and the $3,605,715 / $1,229,155 / $3,024,067 figures are reproduced from the peer-reviewed case study, modeled on JPMorgan Private Bank long-term aggressive growth assumptions (6.3% total return, including volatility). They are projections and cannot be relied upon as an assured result.
- Source. Jonathon M. Morrison, Dylan H. Metzner & Christopher P. Siegle, “The Optimized CLAT: A Compelling Income Tax Deduction Vehicle Hiding In Plain Sight,” Estate Planning (Thomson Reuters), Vol. 47 / No. 9, cover article, September 2020.
[n]dowed does not provide legal or tax advice. Figures are illustrative and depend on individual circumstances. Advisors and clients should consult their own qualified counsel before acting. See our Credentials & Track Record for methodology.