Published on August 16, 2017
slide 1: How to mitigate the taxes that come with a Roth IRA conversion As we all know doing a Roth conversion will produce taxable income unless other mitigating tax strategies are implemented. For the charitably inclined implementing a charitable lead annuity trust CLAT simultaneously with a Roth conversion could be just that mitigating tax strategy. In our current low-interest environment the present value calculation of the stream of future income that is guaranteed from a properly drafted and funded CLAT will create a substantial one-time up-front Schedule A charitable deduction in the year that the trust is created and funded hence reducing the increase of taxable income caused by the Roth conversion. To understand this strategy it will be helpful to describe briefly what a CLAT is and how it works. The trust CLAT is an irrevocable trust that provides a guaranteed income payable to a charity for a specified period of time. When the specified period has passed the trust dissolves and any remaining trust assets revert back to the trustor’s ownership.