Gain an understanding of how to implement charitable remainder trusts for your clients.
Second, only to the charitable gift annuity, the charitable remainder trust (CRT) is the most commonly used vehicle for what is called 'planned' charitable giving. In its present form, the CRT has its origins in the Tax Reform Act of 1969. Both the 1969 legislation and further revisions in 1997 were intended to curb certain abuses, which we will discuss. Properly structured, the CRT can allow the trust settlor to defer recognition of capital gain over twenty or more years while affording a significant charitable income tax deduction at the front end. The device can also be useful in prenuptial and divorce planning. We will look at the basic structure of the CRT, frequently encountered issues in drafting and trust administration, and some planning opportunities. We will examine in some detail the differences between the annuity trust (CRAT) and the unitrust (CRUT), and among the various subspecies of unitrust arising from the choice to impose a net income limitation on the payout, with or without makeup, and with or without a mechanism to flip the net income trust to a straight unitrust payout. You will be able to identify situations in which a CRT is or is not an appropriate planning vehicle, explain how to structure the trust to meet the client's planning objectives, and recognize situations in which an existing trust might require a judicial or nonjudicial reformation, or in which the income beneficiary might want to accelerate the remainder.
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Agenda
The Partial Interest Rule
- Code Section 170(f), per the Tax Reform Act of 1969
- Revenue Rulings Prior to TRA 69
Section 664(d)
- Income to Noncharitable Beneficiaries, Remainder to Charity
- Two Flavors, Fixed Annuity or Unitrust
- Minimum Payout Five Percent
1997 Amendments
- Maximum Payout Fifty Percent
- Present Value Remainder at Least Ten Percent
- cf. the Accelerated Unitrust
- Implementing Regs Re Distribution After Close of Tax Year
Other Requirements
- Distribution at Least Annually
- Term of Years No More Than Twenty
- Qualified Contingency (Does Not Affect Remainder Value)
- No Restriction Preventing Investment for Total Return
- Must Qualify From Inception
Tax Characteristics
- Worst in, First out Taxation of Distributions
- The Trust Itself Is Exempt From Income Tax
- Subject to the Private Foundation Excise Tax Regime
Special Problems
- Rev. Proc. 2005-24
- Valuation of Unmarketable Assets
- Specimen Docs per 2003 Revenue Procedures
- Unrelated Business Taxable Income (UBTI)
- Net Investment Income Subject to 3.8 Percent Medicare Surtax
Requirements Specific to Annuity Trusts
- No Additions
- Probability of Exhaustion
- Rev. Proc. 2016-42
Variations on Unitrust
- Straight Percentage Payout
- Net Income Limitation
Remainder Trust for the Benefit of Third Party
- Non-Spouse
- Spouse
- Noncitizen Spouse
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Credits
OnDemand Course
This course was last revised on June 21, 2023.
Call 1-866-352-9540 for further credit information.
- AK CLE 1.0
- Alaska attorneys may receive 1.0 hours of continuing legal education for completing this program. Please contact the Alaska Bar Association or go to www.alaskabar.org for details regarding reciprocity with other states.
- AL CLE 1.1
- This course or a portion thereof has been approved by the Alabama State Mandatory Continuing Legal Education Commission for a maximum of 1.1 hours credit.
- AR CLE 1.0
- This course has been approved for 1.0 hours of CLE by the Arkansas CLE Board.
- Arizona CLE 1.0
- The Arizona State Bar does not pre-approve or pre-certify MCLE programs. However, records of this program and attendance will be maintained by Lorman Education Services for auditing purposes. This activity may qualify for up to 1.0 hours toward your annual CLE requirement for the State Bar of Arizona.
- CA MCLE 1.0
- Lorman Education Services is a State Bar of California approved MCLE sponsor and this course qualifies for 1.0 CLE hours of participatory credit.
- CT CLE 1.0
- Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. This course has been approved for CLE credit in jurisdictions aside from CT and therefore it automatically meets the content and delivery requirements in Connecticut. Credit is based on a 60 minute credit hour and shall be awarded as follows: 1.0 CLE credit(s).
- GA CLE 1.0
- This program has been approved by the Georgia Commission on Continuing Lawyer Competency for 1.0 CLE hours.
- HI CLE 1.0
- This program was approved by the Hawaii State Board of Continuing Legal Education for 1.0 CLE credit hours.
- IL CLE 1.0
- This course was approved for a total of 1.0 hours of MCLE Credit by the Illinois MCLE Board.
- MO CLE 1.3
- This course qualifies for self-study CLE credit in Missouri.
- ND CLE 1.25
- North Dakota CLE policy does not allow for pre-approval of any self-study courses. This course may qualify for up to 1.25 hours of CLE credit.
- NH MCLE 1.1
- NH MCLE does not approve or accredit CLE activities for the NH Minimum CLE requirement. Lorman Education Services believes this Ondemand course meets the requirement of NH Supreme Court Rule 53 and may qualify for CLE credit(s). Program Length: 68 Minutes.
- NM CLE 1.1
- This program has been approved by the New Mexico Minimum Continuing Legal Education Board for 1.1 hours of credit.
- NV CLE 1.0
- This program has been approved by the Nevada Board of Continuing Legal Education for 1.0 CLE hours.
- NY CLE 1.0 including Areas of Professional Practice 1
- This course has been approved in accordance with the requirements of the New York Continuing Legal Education Board for up to a maximum of 1.0 credit hours in the area(s) of Areas of Professional Practice for 1.00 hour. Each hour may be counted only as satisfying one category of credit. Duplicate credit for the same hour of instruction is not permitted. This course qualifies for both established and newly admitted attorneys. Lorman Education- Noggin Guru, Inc. has a financial hardship guideline. Please contact customer service at 1.866.352.9539 for instructions on how to apply.
- PA CLE 1.0
- This Distance Learning program has been approved by the Pennsylvania Continuing Legal Education Board for 1.0 hours of substantive law, practice and procedure CLE credit.
- RI CLE 1.0
- This program has been approved by the Rhode Island Mandatory Continuing Legal Education Commission for 1.0 hours of CLE credit.
- VT CLE 1.0
- This self-study program has been approved by the Mandatory Continuing Legal Education Board of Vermont for 1.0 hour(s) of CLE credit. Please note: Attorneys may only claim 12 credits per compliance period in this format. This course is considered "Non-Moderated Programming without Interactivity".
- WA CLE 1.25
- This program has been approved by the Washington State Board of Continuing Legal Education for 1.25 hours of A/V credit under the Law & Legal Procedure category.
- WV MCLE 1.3
- This program has been approved by the West Virginia State Bar MCLE Commission for 1.3 MCLE hours.
To earn each credit Lorman offers through the OnDemand learning platform, you need to watch 100% of the program. Also, for certain credits you will need to fulfill additional requirements which will be displayed on the "credits" tab when viewing the course.
This program does NOT qualify, nor meet the National Standard for NASBA accreditation.
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Why Lorman?
Over 37 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Faculty
Russell A. Willis, III, J.D., LL.M.
Planned Gift Design Services
- Freelance paralegal consultant to advisors for nonprofits and their donors in structuring charitable contributions of closely held business and real property interests to serve the mutual advantage of all parties
- Manager of noncash research for Charitable Solutions, LLC, a planned gift risk management consulting firm headed by Bryan Clontz
- Provides legal research and advice on income and transfer tax planning more generally and writes the occasional trial or appellate brief
- For ten years, was writer and editor for a subscription website that provided daily coverage and in-depth analysis of developments in tax law affecting charitable gift planning
- Six years ago launched his own newsletter, the Jack Straw Fortnightly
- Back issues and authored papers posted to https://www.plannedgiftdesign.com/
- Has spoken at several national and regional conferences and to local and regional planned giving roundtables, community foundations, and bar associations
- J.D. from St. Louis University, LL.M. in taxation law from Washington University in St. Louis, undergraduate degree in English literature from Indiana University Bloomington master’s in Humanities from the University of Chicago
- Can be contacted at [email protected] or 314.566.3386
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