Split Interest Trusts legal definition of Split Interest Trusts
charitable remainder trust (redirected from Split Interest Trusts)
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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substantial funds or assets into an irrevocable trust (a trust in which the basic terms cannot be changed or the gift withdrawn) with an independent trustee, in which the assets are to go to charity on the death of the donor, but the donor (or specific beneficiaries) will receive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.
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References in periodicals archive
Split interest trusts
file Form 5227 annually to report financial activity and to determine if the trust should be treated as a private foundation.
* The use of split interest trusts
, such as charitable remainder trusts, still can be used to accomplish lifetime income tax and charitable planning objectives.
Using the theory that an asset can be separated into two components, a life (or term certain period) interest and a death (or other remainder) interest, noncharitable and charitable split interest trusts
are current tax planning tools with their distinguishing features and benefits outlined in Exhibit 4.
All split interest trusts
must file Form 5227, Split Interest Trust
Information Return, annually to report their financial activities and to determine if the trust is to be treated as a private foundation.