Frequently Asked Questions

1. What is a Charitable Remainder Unitrust?
2. What Formats are available for Charitable Remainder Unitrusts?
3. What are some possible, personal financial benefits for creating a Charitable Remainder Trust?
4. Who are the Candidates for a Charitable Remainder Trust?
5. How is the income tax charitable deduction calculated for a gift to a Charitable Remainder Trust?
6. What are the gift and estate tax consequences of retaining an income interest in a Charitable Remainder Trust?
7. What tax and information returns are required after a Charitable Remainder Trust is created?
8. What are the Annual Valuation Rules for Charitable Remainder Unitrusts? and Why are the Annual Valuation Rules Important?
9. What is a Charitable Remainder Annuity Trust?
10. What Factors Should I Consider When Choosing a Payout Format for my Charitable Remainder Trust?

11. How do I select a measuring term for my Charitable Remainder Trust?

    The rules concerning the payment period or measuring term of a charitable remainder trust offer great theoretical flexibility in designing a trust's operational life. However, flexibility often breeds complexity and the possibility of producing undesired tax consequences. Therefore, this section should be read with consideration of the marital deduction, as well as the gift, estate and GST tax consequences of various measuring term formats. 

    Following are common forms of measuring terms:
    

    • Life only - The trust makes payments to one or more named individuals as long as one individual is alive.
      
    • Term of Years - The trust makes payments to one or more persons for a period not to exceed twenty years.
      
    • The Longer of Life and Concurrent Term of Years - The trust makes payments for a guaranteed term (not to exceed 20 years) that is concurrent with the lives of one or more individuals. For example, the trust could pay income to an individual as long an individual is alive, or for a period of 14 years, whichever is longer. If the individual dies within the first 14 years, income will be distributed to the individual's estate, named individuals or a named class of individuals for the balance of the original 14-year period.
      
    • The Shorter of Life and Concurrent Term of Years - The trust makes payments for the shorter of a term (not to exceed 20 years) or the life (or lives) of the measuring life. For example, the trust could pay income to an individual for a period of twenty years; however, if the individual dies during the twenty-year period, all payments stop and the remainder interest then passes to the charitable beneficiary.
      
    • Lives Followed by the Shorter of Lives or a Term of Years - The trust makes payments to named recipients for the balance of their lives. At their deaths, the trust continues to make income payments to a new group of recipients whose income term is measured by the shorter of their lives or a term of years not to exceed twenty (which begins at the death(s) of the first class of life recipients). If the second class of recipients dies within the term of years (in this example, twenty), the trust terminates.
      

    Planning Caution: It is important to notice that every life recipient in this example was specifically identified when the CRT document was created. This is particularly true for the second group of income beneficiaries. If the second group of income beneficiaries were not specifically known when the CRT was funded, the trust would not qualify as a charitable remainder trust. As a further illustration, the second group of income beneficiaries could not include people (e.g., grandchildren) who were born after the trust was created.

     A 1992 study conducted by the National Committee on Planned Giving (www.NCPG.org) reported that 94% of charitable remainder trusts are measured by the life of the last surviving income recipient; 4% provide payments for a fixed term of years; and only 2% contain a combination of lives and a term of years.

12. What are some methods of income deferral within a Flip Charitable Remainder Unitrust (Flip-CRUT) or a Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT)?
13. What is a Flip Charitable Remainder Unitrust (Flip-CRUT)?
14. What are the Typical Responsibilities of a Trustee of a Charitable Remainder Trust?
15. What is an “Independent” Special Trustee (IST)? When is an IST used in Charitable Remainder Trust Planning?