Final answer:
A charitable lead trust must pay its income stream to a charity for a specified term and the remainder interest in the corpus is distributed to a noncharitable beneficiary, not necessarily for the lifetime of the beneficiary.
Step-by-step explanation:
When examining the nontax characteristics of a charitable lead trust (CLT), you will find that it is a type of trust designed to provide an income stream to a charity for a set period of time, after which the remainder of the trust assets passes to noncharitable beneficiaries.
A crucial point about CLTs is that the income stream must be paid to the charity for a specified term, which can be for the lifetime of individuals or a fixed number of years, but not necessarily for the lifetime of the beneficiary.
The grantor of the trust may receive a charitable income tax deduction in the year the trust is funded, based on the present value of the income stream set to go to the charity. However, this deduction can be subject to various limitations and regulations.
Finally, it must be clarified that in a charitable lead trust, the trust must distribute the remainder interest in the corpus to a noncharitable beneficiary after the charitable term has ended. This is the defining characteristic that distinguishes it from a charitable remainder trust, where the remainder interest is distributed to a charitable beneficiary.