Facts
- Some time ago, H and W established a CRAT of which they are the trustees.
- The remainder beneficiary of the CRAT is H and W’s private foundation.
- The assets of the CRAT have grown to the point where they’re way more than needed to support the annuity payments to H and W.
What H and W Want to Do
H and W want to amend the CRAT so that excess trust income will be distributed each year to the foundation; also, so that they, as trustees, will have the discretion to distribute trust principal from time to time to the foundation.
- Any principal distributions will be such that at least “$X” of principal will remain in the trust — $X being plenty enough (according to the ruling) to support the annuity payout.
- The amendment, therefore, will not affect the actuarial value of the annuity payout.
The Ruling
- IRS gives a green light to the proposed amendment.
- But IRS says H and W won’t get any federal income tax charitable deduction as a result of the amendment.
Note This
Any principal distributions must be fairly representative of the basis of all assets available for distribution on the date the assets are distributed.
Comment
This is a great little ruling. “Little” because it’s a private ruling, which means only H and W can rely on it. “Great” because it shows how to turn an existing CRAT into a current gift plan.
Although private, the ruling makes sense and therefore serves as a guide post.
by Jon Tidd, Esq
