Charitable Remainder Trusts, Charitable Gift Annuities, and Pooled Income Funds (Portfolio 865)

Description

Tax Management Portfolio, Charitable Remainder Trusts, Charitable Gift Annuities, and Pooled Income Funds, No. 865, describes and analyzes the rules governing the creation and administration of a qualified charitable remainder trust and summarizes the relevant income, gift, estate, and generation-skipping transfer tax considerations, as well as the private foundation prohibitions, that relate to charitable remainder trusts. These rules are set forth primarily in §§170, 664, 2055, and 2522. The basic statutory structure was established by the Tax Reform Act of 1969 in an attempt to correct perceived abuses in the charitable trust area. Of particular concern were “split-interest” trusts, such as charitable remainder trusts, which have both charitable and noncharitable beneficiaries.

In the case of a qualified charitable remainder trust, the donor is entitled to an immediate income, gift, or estate tax charitable deduction equal to the present value of the charitable remainder interest upon the creation of the trust. The donor may retain an income interest in the trust for his or her life (or a term of years not to exceed 20) or create such an interest in another. Subject to certain restrictions, a donor can specify successive or concurrent beneficiaries. In addition, the interest of the noncharitable beneficiary or beneficiaries can be in the form of the payment, at least annually, of either a guaranteed annuity amount (a sum certain) or a unitrust amount (a stated percentage of the market value of the trust assets as revalued annually). The trust may be either inter vivos or testamentary.

This Portfolio also examines the §642(c) rules applicable to pooled income funds, including the requirements governing the creation of a qualified pooled income fund and the availability of income, gift, or estate tax charitable deductions for gifts to such funds. Pooled income funds are similar to charitable remainder trusts in that a donor retains an income interest in the property donated (or creates such an interest in another) and the donor is entitled to an immediate charitable deduction for the present value of the remainder interest passing to charity.

Planners must follow the statutory requirements very carefully in order to insure that the establishment of the trust or the gift to the pooled income fund has the desired income, gift, estate, and generation-skipping transfer tax consequences.

This Portfolio may be cited as Rosepink and Bradley, 865 T.M., Charitable Remainder Trusts and Pooled Income Funds.

Table of Contents

Part I: Charitable Remainder Trusts
1:I. Introduction
1:II. Legislative History
1:III. Basic Considerations
1:IV. General Rules Applicable to Annuity Trusts and Unitrusts
1:V. Payment of Annuity and Unitrust Amounts
1:VI. Remainder Beneficiary Rules
1:VII. Taxation of the Recipient of the Annuity or Unitrust Amount
1:VIII. Taxation of Grantor
1:IX. Taxation and Administration of Trust
1:X. Private Foundation Rules
1:XI. Income, Gift, and Estate Tax Charitable Deductions
1:XII. Income Tax Charitable Deduction
1:XIII. Gift Tax
1:XIV. Estate Tax
1:XV. Generation-Skipping Transfer Tax
1:XVI. Planning Considerations

Part II: Pooled Income Funds
2:XVII. Introduction and Summary of Requirements
2:XVIII. Specific Requirements for Qualification
2:XIX. Type of Property Contributed to or Held by a Pooled Income Fund
2:XX. Valuation of Income and Remainder Interest
2:XXI. Amending the Governing Instrument
2:XXII. Tax Considerations
2:XXIII. Securities Laws
2:XXIV. Planning Considerations
2:XXV. Drafting Considerations
2:XXVI. Filing Requirements