(1) Client contributes assets to the CLAT. The CLAT is structured so that the value of the transferred assets equals the present value of the payments to charity. Structuring a zeroed-out CLAT is more difficult when using one or more specified lives as a measuring term than when using a set term of years.

(2a) The CLAT pays a specified amount to one or more charitable organizations (expressed either as a fixed amount or as a percentage of the net fair market value of the assets initially contributed to the CLAT (the amount can increase from year to year).

(2b) Assets held in the CLAT appreciate (or depreciate).

(3) At expiration of the CLAT term, any assets remaining in the CLAT are distributed to the remainder beneficiaries (or held in trust for their benefit), free of estate and gift tax.