For Wealth Advisors

Grow Your AUM.
Keep It Through Every Cycle.

An Optimized CLAT lets your high-net-worth clients place assets under management into a protected, tax-advantaged wrapper engineered to weather multiple business cycles. With a 15–30 year horizon, long-term growth and tax-free compounding do the heavy lifting — and the assets stay under your management the entire time.

15–30 yr
AUM Lock-Up Horizon
Up to 30%
of AGI Deductible
~3.6×
Modeled AUM at Year 30
Day 1
Creditor Protection
Hiding in Plain Sight

The Income-Tax Edge Advisors Overlook

The CLAT has existed in the Code since 1969, yet only ~5% of charitable split-interest returns are CLATs. Historically it was treated as an estate-and-gift-tax tool for the ultra-wealthy. The peer-reviewed analysis below makes the opposite case: it is the income-tax benefits that make the Optimized CLAT compelling — 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 separate Optimized CLAT can be funded year after year — “racked, stacked and rolled” — eliminating up to 30% of a client’s taxable income annually while every dollar contributed stays invested under your management for decades.

A Protected, Tax-Advantaged Wrapper

How the OCLAT Grows Your AUM

Because the OCLAT has a long-term lock-up period, the strategy relies on long-term growth and tax-free compounding to survive economic downturns. Four structural features make it a durable, cycle-proof source of assets under management.

01
Tax-Free Compounding Across Business Cycles
During an expansion, OCLAT AUM grows without income-tax drag — capital gains and interest flow to the grantor’s personal return and are paid from outside the trust. In a recession or correction, you can harvest losses and re-diversify inside the trust. Managing actively without “tax drag” lets the portfolio ride out bear markets and capture the full upside of the next bull market over a 15–30 year window.
No tax drag on growth
02
The IRS Charitable Hurdle Rate
At funding you lock in the IRS §7520 rate — the “charitable hurdle rate” — for the life of the trust. Beat that historically low hurdle over the long term and the assets compound rapidly for your client’s heirs. It is a natural hedge against volatility: even in slow environments, simply surpassing a low fixed hurdle leaves significant wealth behind.
Lock a low hurdle for 30 yrs
03
Long-Term Horizon vs. Short-Term Volatility
A core OCLAT strategy is the backloaded “1-3-5 rule of thumb” — for every $1M contributed, expect roughly $5M returned at year 30 at an ~8% return. Managed across three decades, short-term recessions become temporary blips: the long horizon lets the trust absorb down cycles, recover, and compound the initial tax savings across multiple peaks and troughs.
$1M → ~$5M at year 30
04
Asset Protection & Flexibility
Throughout the charitable lock-up, OCLAT AUM is shielded from personal creditors, bankruptcy, and lawsuits — security that helps business owners and investors ride out severe cycles knowing this bucket is legally insulated. And on a “home run” OCLAT, the IRS permits early termination once remaining charitable payments are fulfilled, giving early access to the accumulated wealth.
Creditor-proof, with an exit

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

A Case Study Illustrating the Optimized CLAT

One $1M Funding, Decades of AUM

From the peer-reviewed article: Joe, a 45-year-old attorney earning $3M (spouse Sheila earns $500K), funds an Optimized CLAT with $1,000,000 — roughly 30% of AGI — by simply transferring securities from his brokerage account. He claims a $1,000,000 deduction (~$370,000 of immediate tax savings) and, as Investment Trustee, keeps managing the assets. He selects a 30-year term with maximum IRS-approved backloading, so charitable payouts stay small for years and the assets compound.

Exhibit 1 — Value of the Optimized CLAT, Year by Year $1M grows to $3,605,715 in AUM
YearAnnuity to CharityCLAT 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

Funded
$1.0M
Securities moved from one account to another.
AUM at Year 30
$3.6M
More than 3.5× the contribution, still managed.
To Charity
$1.23M
Backloaded to the final years of the term.
Value Added by CLAT
$3.0M
Total beneficiary wealth vs. holding the assets (Exhibit 2).

Across the article’s scenarios, funding the CLAT roughly triples what transfers to Joe’s heirs versus doing nothing ($859,799 vs. $2,766,297, all else equal), and the comparison in Exhibit 2 shows $3,024,067 of value added by the CLAT once tax and estate benefits are combined. For the advisor, the headline is simpler: a single funding decision converts $1M into decades of growing, protected, fee-generating AUM.

Side-by-Side Comparison

Roth IRA vs. 401k vs. OCLAT

You already know the Roth and 401k. Here is why the OCLAT operates in an entirely different league — especially for high-net-worth 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
The Bottom Line

Built to Outperform

Stack the OCLAT against the vehicles your clients already hold. It is funded without contribution or income limits, deducted up to 30% of AGI, compounded tax-free, transferred estate-tax-free, and protected from creditors from day one — a combination 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) caps contributions near $23,500 a year and taxes heirs as ordinary income. A Roth IRA caps at $7,000 and phases out entirely above moderate incomes. The OCLAT has no contribution ceiling, no income test, and returns multiples of the contribution to the family free of gift and estate tax — while the charity receives more, not less.

Source, Assumptions & Disclosures

  1. 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.
  2. 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.
  3. 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.

For Your Practice

Put an OCLAT to Work for Your Book

We design and fund every OCLAT directly, in coordination with you and your client’s tax counsel. Request a personalized model for a specific client — no cost, no commitment.

Run My OCLAT Analysis Schedule a Consultation See the Comparison