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

ii.
iii.
iv.
RMDs. Spouse takes over RMDs in her own name.
Estate tax. The account will be included in P’s gross
estate, but an estate tax charitable deduction will be
allowed for the present value of the charity’s remainder
interest. IRC § 170(f)(2); Treas. Reg. § 1.170A-6. The
value of the children’s interest in the CRT will be included
in P’s taxable estate.
Income Tax. The distribution the CRT receives from the
retirement account will be included in the CRT’s gross
income as IRD, but because the CRT is tax-exempt, it will
not pay tax on that distribution. Distributions from the
CRT to a child will carry out the CRT’s categories of gross
income likely as ordinary income.
6. Implementation.
a) Any income tax deduction against IRD for estate
tax paid on the children’s interest in the CRT will
probably not benefit the children.
a. With any retirement account other than an IRA, the “plan
document” should be reviewed to determine whether it permits the
type of beneficiary designation which will be needed to implement
the desired charitable gift, and whether it permits a lump sum
distribution. The following types of accounts are normally suitable
for outright charitable gifts and distributions to CRTs: Profit
sharing plan, 401(k) plan, IRA and money purchase plan. Defined
benefit plans and 403(b) annuity plans are usually less suitable
because the benefit often comes in the form of an annuity.
b. If retirement account is a qualified plan account, be sure all
necessary spousal consents are obtained.
c. Submit proposed beneficiary designation to plan administrator or
IRA custodian for approval.
IV.
CHARITABLE LEAD TRUSTS (“CLTs”).
A. Key Characteristics.
1. A CLT is an irrevocable trust, once the donor creates the trust, the donor
cannot revoke or unilaterally modify the trust.
2. The donor may create the trust during life or at death through the donor’s
will or revocable trust.
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