TRANSFERS OF REMAINDER INTERESTS

1
TRANSFERS OF REMAINDER INTERESTS
2
Transfers Outside of Trusts

• Deduction for value of remainder
• Conservation easements
• Personal residence or farm
• Not in trust, not revocable or contingent
• Not furnishings, personal property
• Not principal residence eg vac home, yacht
• Undivided portion of an entire interest
• Portion of land, portion of year

3
Charitable Remainder Trusts

• Charitable Remainder Annuity Trust
• Charitable Remainder Unitrust
• Pooled Income Fund

Self, Spouse, Other
Income

Donor
Trust
Property
Remainder
Charity
4
Charitable Remainder Annuity Trust CRAT

• Fixed payment to income benef
• Payment for fixed term lt 20 years or for one or
  more natural lives
• Payment of income at least annually
• Payment gt 5 and lt 50 of initial corpus value
• Remainder gt 10 of initial corpus value

5
Charitable Remainder Unitrust CRUT

• Fixed of corpus payment to income benef
• Payment for fixed term lt 20 years or for one or
  more natural lives
• Payment of income at least annually
• Payment gt 5 and lt 50 of initial corpus value
• Remainder gt 10 of initial corpus value
• Variations NICRUT, NIMCRUT

6
Using Remainder Trusts

• Permanent loss of corpus
• No split remainders
• Non-exempt in any year with UBTI
• Early terminations/remainders OK
• Distributions pass-through character, designated
  as from
• Current then accum income
• Current then accum, STCG, then LTCG
• Current then accum exempt income
• Corpus

7
Funding Remainder Trusts

• Use IRD items eg retirement plan balances
• Use appreciated assets
• Dont use S corp stock, muni bonds
• Dont use UBTI producers
• Real estate
• Contribution ? Bargain sale rule
• Rental inc is UBTI if debt-financed

8
Annuity Trust or Unitrust?

• All CRTs are exempt entities
• CRAT
• Only one contribution of assets
• So only one valuation/appraisal
• Guaranteed payment to charity
• CRUT
• Multiple contributions/appraisals
• Useful in disbanding a business, settling
  multiple retirement funds
• Charity shares in investment gain/loss, inflation

9
Wealth Replacement Trusts

• Because the survivors are clients too!
• Charitable donor needing cash flow
• Charitable donor with responsibility for another
• Cannot deplete estate eg business
• Paying for college
• Augmenting retirement plans