Probate & Trust Law Section Conference Manual ... - Minnesota CLE

4. If a trust is measured by the life of an individual, the noncharitable
beneficiary can be a trust for the benefit of that person as long as that
person is financially disabled. Rev. Rul. 2002-20, 2002-1 CB 794 (2002).
5. No amounts (other than the annual payments) may be paid from the trust
to a non-charitable beneficiary. Treas. Reg. § 1.664-2(a)(4), Treas. Reg. §
1.664-2(a)(4).
F. Charitable Remainder Beneficiary.
1. When the donor funds the CRT, the donor’s contribution must result in a
charitable remainder interest equal to at least 10% of the value of the
contributed property. See IRC § 664(d)(1)(D).
2. At the end of a CRT’s term, the trustee distributes the remaining trust
property to one or more section 170(c) charitable organizations, including
public charities, private charities and a combination of public and private
charities.
3. Generally, the donor can retain the right to change the trust’s remainder
beneficiary. See Rev. Ruls. 76-7 and 76-8. This allows the donor to defer
the decision of which charity will benefit from the trust.
G. Tax Considerations for the Donor.
1. Income Tax.
a. The donor will receive income tax charitable deduction during the
year of the transfer of the property to the trust. The amount of the
deduction will equal the present value of the portion of the trust
that will ultimately pass to charitable beneficiaries. IRC§§
170(A)(2)(A); 170(f)(2)(A); 2522(c)(2)(A); and 2055(a)(2)(A).
b. The income tax deduction is limited by the general rules governing
the deduction of charitable contributions and contribution limits
will vary based on the type of property contributed.
c. In order for the donor to maximize his or her income tax
deduction, the remainder charitable beneficiary must be described
in IRC § 170(b)(1)(A).
d. If the donor transfers tangible personal property to the trust (e.g.,
artwork or books), the income tax deduction is delayed until the
noncharitable interests have expired or possibly when the tangible
personal property is sold. Priv. Ltr. Rul. 9452026.
e. In order to receive a charitable deduction, the donor’s contribution
to the trust must be substantiated and properly valued.
5