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Posted March 9th, 2016

How to Modify an Endowment: A Real-World Case

FACTS

About 10 years ago, Donor set up a 10-year term charitable remainder annuity trust (CRAT) that was to make payments to Donor’s son.

The payout period of the trust has just run its course, and the CRAT is about to distribute its assets to Charity.

The trust agreement provides that the assets distributed to Charity are to be held as an endowment for Purpose X.

Donor’s son now calls Charity’s planned giving director and says he wants the assets to be held as an endowment for Purpose Y. Son represents that Donor is agreeable to this change of purpose.

QUESTION

Given that the purpose is embedded in the CRAT agreement, can the purpose now be changed?

ANSWER

Yes. Endowments are governed by UPMIFA, which is discussed in a prior blog post. UPMIFA provides that the terms of an endowment can be changed by written agreement between the donor and the charity. The donor, of course, has to be living, which is the case here, so there’s no problem.

Click here to download our free white paper “Everything You  Need to Know About UPMIFA” for more information.

Endowment agreements can present various questions. For answers, contact a Sharpe Group representative.

by Jon Tidd

 

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