Question--If debt-encumbered appreciated real estate is to be contributed to a charitable remainder trust
, does that create any special considerations?
Conversely, charitable remainder trusts
that are unitrusts, which pay out a predetermined percentage of the net fair market value (FMV) of the trust each year, are not as attractive for individuals in this low-interest-rate environment because the remainder interest passing to the beneficiaries is calculated using the unitrust percentage (at least 5%), rather than the Sec.
After establishing a charitable remainder trust
, the grantor gives property to the trust while retaining a right to payments from the trust.
The IRS has treated the division of a charitable remainder trust
into separate trusts as a nontaxable event where the separate trusts are funded pro rata and beneficiaries receive interests that are essentially equal to the original interests.
As noted above, in the case of charitable remainder trusts
, the individual grantor and the charity are happy.
On appeal, the petitioner further contended that the estate had only minor defects in satisfying the charitable remainder trust
requirements since the percentage of trust income going to the income beneficiary was "fixed" at 100%.
* A charitable remainder trust
(CRT) provides an annuity to noncharitable beneficiaries for a term of years, either as a fixed amount (charitable remainder annuity trust, or CRAT) or percentage of assets (charitable remainder unitrust, or CRUT) and the remainder to a charitable beneficiary.
The tax savings and increased cash flow offered by the use of a charitable remainder trust
will often enable the grantor to use some or all of these savings to fund a wealth replacement trust for the benefit of his heirs, thereby providing for the tax effective replacement of property which had been transferred to the charitable remainder trust
Under a charitable remainder trust
(CRT) agreement, an income stream is distributed annually to one or more noncharitable beneficiaries for a defined period.
A charitable remainder trust
(CRT) is a trust instrument that provides for specified payments to one or more individuals, with an irrevocable remainder in the trust property to be paid to or held for a charity.
One example, a Charitable Remainder Trust
(CRT), when combined with a Special Needs Trust (SNT), creates a powerful combination that can result in a win-win-win situation for the child with special needs, the parent or other trust settlor, and the charity.
The two main types are the charitable remainder trust
and the charitable lead trust.
A Charitable Remainder Trust
permits a property owner to contribute appreciated property to a Charitable Remainder Trust
(CRT) for the benefit of a designated charity.
One way is to create a charitable remainder trust
funded with highly appreciated property that generates a low income yield.
(6) Ordinarily, gifts to charity via a charitable remainder trust
(CRT) or pooled income fund would be considered future interest gifts because the charity's actual receipt of the donated property is delayed; nevertheless, such gifts are deductible at the time of the gift if the trust meets strict statutory requirements.