Answer--Yes, several issues must be considered before contributing debt encumbered real estate to a
charitable remainder trust, including a CRUT.
The tax savings and increased cash flow offered by the use of a
charitable remainder trust often enable the grantor to use some or all of these savings to fund a wealth replacement trust for the benefit of his or her heirs, thereby providing for the tax-effective replacement of property that has been transferred to the
charitable remainder trust.
How are the payments from a
charitable remainder trust to a beneficiary taxed?
In the past, taxpayers have asserted the following actions as within the meaning of commencing a "judicial proceeding" under section 2055(e)(3)(C)(iii), but these efforts were in vain: 1) filing a probate form indicating that a
charitable remainder trust exists, and 2) attaching an explanation statement on the estate tax return mentioning a
charitable remainder trust.
UPON DEATH the property placed in the
charitable remainder trust passes to the designated charity.
Generally, donors contribute to existing pooled income funds, thus incurring far lower administrative costs to the grantor than a
charitable remainder trust. At the time of donation, the grantor receives income and gift tax deductions equal to the estimated value of the eventual charitable contribution.
A charitable lead trust (CLT) is essentially the reverse of a
charitable remainder trust. In a CLT, the donor gives the charity the current economic benefit or payment stream from the transferred assets and retains the right to receive the assets back at the end of the designated term of years or transfer that right to another person.
If you want to make a gift of money or appreciable property to an IRS-recognized charity, while at the same time providing for a child with a disability or other special need, a 1969 change to the tax code allows you to set up a
Charitable Remainder Trust and transfer the property to the CRT rather than directly to the charity.
With a
charitable remainder trust, the assets provide a stream of income for a family for either the life of the donor or a number of years.
Step 2: Simultaneous with the large cash gifts, the client establishes a testamentary
charitable remainder trust that provides that at the client's death prior to his wife, she will receive all the income from the trust for as long as she lives.
(9) The IRS has further ruled that such coins can be used to fund a
charitable remainder trust since they are readily convertible to other income producing assets.
For this reason the NIMCRUT is perhaps the most popular type of
charitable remainder trust, since it allows for the deferral of income to later years, much like a deferred-income retirement plan, and still allows the trustee to maximize the payout amount.
