charitable remainder trust

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charitable remainder trust (Charitable Remainder Irrevocable Unitrust)

n. a form of trust in which the donor (trustor or settlor) places substantial funds or assets into an irrevocable trust (a trust in which the basic terms cannot be changed or the gift withdrawn) with an independent trustee, in which the assets are to go to charity on the death of the donor, but the donor (or specific beneficiaries) will receive regular profits from the trust during the donor's lifetime. The IRS will allow a large deduction in the year the funds or assets are donated to the trust, and the tax savings can be used to buy an insurance policy on the life of the donor which will pay his/her children the proceeds upon the donor's death. Thus, the donor (trustor) can make the gift to charity, make a return on his/her money and still arrange to make a large gift at death to his/her heirs. The disadvantage is that the assets are permanently tied up or committed.

References in periodicals archive ?
The IRS disallowed the deduction, claiming it was a split-interest trust with charitable and noncharitable beneficiaries that did not qualify under Sec.
The split-interest trust would generally be subject to Sec.
508(d)(2), no estate or gift tax charitable deduction is allowable for a transfer to a split-interest trust, unless the trust complies with the private foundation governing instrument requirements under Sec.
664(b)(1), (2) or (3); and/or (2) the trust distributes property (other than cash) it owned as of the close of the tax year to pay the annuity or unitrust amount and the trustee elects on Form 5227, Split-Interest Trust Information Return, to treat any income generated by the distribution as occurring on the last day of the tax year for which the amount is due.
Provisions outlined in the Pension Protection Act of 2006 resulted in a major revision of Form 5227, Split-Interest Trust Information Return, for Tax Year 2007.
664(b)(1), (2) or (3) or (2) the trust distributes property (other than cash) that it owned as of the close of the tax year to pay the annuity or unitrust amount and the trustee elects (on Form 5227, Split-Interest Trust Information Return) to treat any income generated by the distribution as occurring on the last day of the tax year for which the amount is due.
The trustee must indicate the various amounts on Form 5227, Split-Interest Trust Information Return, and on the Schedule K-1 provided to the beneficiary.
5] Split-interest trust and fi duciary income tax statistics are
Because Form 5227, Split-interest Trust Information Return, explicitly requires disclosure of the CRUT's payout percentage, it should be easy for the IRS to identify high-payout CRUTs for examination.
Form 5227, Split-Interest Trust Information Return, is filed by entities with both charitable and noncharitable beneficiaries.
2702, if a grantor wants to reduce the gift tax value of property transferred to a split-interest trust, the retained income interest must generally be an annuity or a unitrust interest.
4947 was enacted to prevent taxpayers from using the split-interest trust device to avoid the restrictions being imposed on private foundations.