Estate Planning Chapter 16

Front 1

Qualified Charitable Organizations

Back 1

(1) Corporations exclusively for religious, charitable, scientific, literary, educational purposes
(2) In US, any political subdivision if made for exclusively public purposes
(3) Fraternal society, order, association
(4) Veterans organizations

Front 2

Reasons for Denying Charitable Deduction

Back 2

(1) Net earnings used to benefit stockholder or individual
(2) Substantial activities spent on propaganda to influence legislation
(3) Charity works for political campaign
(4) Contingent gifts unless highly likely
(5) Portion to which the contribution may be used by the charity for non-charitable purposes

Front 3

Forms of Charitable Gifts (besides bequests)

Back 3

(1) Powers of Appointment
(2) Partial Interests
(3) Split Gifts
(4) Charitable Remainder Trusts
(5) Charitable Lead Trusts
(6) Charitable Gift Annuities
(7) Community Foundation
(8) Donor-Advised Funds
(9) Private Foundations

Front 4

Split Interest Arrangement

Back 4

Arrangement in which interests in a charitable contribution are split between one or more non-charitable beneficiaries and a charity

Front 5

Types of Partial Interests that may be Bequeathed to a Charity (qualify for the deduction)

Back 5

(1) Testamentary gift of an undivided portion of a decedent's entire interest in property not held in trust
(2) A non-trust remainder interest in a personal residence
(3) A non-trust remainder interest in a farm transferred by the decedent at death; a transfer of partial interest in property to organization exclusively for conservation purposes
(4) Remainder interests in trust to charitable remainder trusts and pooled-income funds
(5) Charitable lead trust

Front 6

Split Deduction Gift

Back 6

Donor-decedent may create a charitable remainder trust and obtain deductions for both the charitable and non-charitable bequests; a surviving spouse and a charity can be income and principal beneficiaries, respectively, and satisfies marital and charitable deduction requirements (if it is QTIP)

Front 7

Charitable Remainder Trusts (definition and types)

Back 7

Decedent transfers a remainder interest in property to a charity in trust

Types:
(1) Charitable Remainder Annuity Trust
(2) Unitrust
(3) Pooled-Income Fund

If none of these types, the trust may not receive the deduction

Front 8

TRA '97 Limits with Respect to CRTs

Back 8

(1) Percentage of assets required to be distributed at least annually cannot exceed 50% of the initial FMV of the trust assets for charitable annuity trusts or 50% of the annual value of the trust assets for charitable unitrusts
(2) Value of the remainder interest of a CRT must be at least 10% of the value of the property transferred into the trust

Front 9

Charitable Remainder Annuity Trust

Back 9

Provides a non charitable income beneficiary with a fixed sum annuity paid at least annually that is required to be worth at least 5% of the initial net FMV of the property in trust, and when the last beneficiary dies or after 20 years, the remainder passes to a qualified charity

Does not allow additional contributions, and must have at least a 95% chance that the trust won't be exhausted before it can go to charity; income beneficiary may be paid out of principal if income is insufficient

Front 10

Charitable Remainder Unitrusts

Back 10

A fixed percentage (at least 5% of the net FMV) is paid at least annually to non-charitable income beneficiaries and at the death of the last income beneficiary or at the end of a term of not greater than 20 years, the remainder passes to a qualified charity

Income beneficiaries may not be paid out of principal; prior deficits may be paid from income in the future

Front 11

Net Income Unitrusts

Back 11

A regular unitrust except that payout is limited to the lesser of the stated payout % or the net income earned by the CRUT during the year and income-payout deficiencies of prior years

Protects interest of the remainder beneficiary, and good for property with little or fluctuating income

Front 12

FLIP-CRUT

Back 12

A NIMCRUT with a feature that allows the NIMCRUT to become a regular CRUT upon some trigger event

Front 13

Pooled Income Funds

Back 13

Fund maintained by a qualified charity that contains commingled donations from many sources and that allows a donor's estate an estate tax charitable deduction for the remainder interest; income distributed annually to non-charitable beneficiaries

Front 14

Charitable Lead Trusts

Back 14

Tax planning device in which the donor transfers property inter vivos or by will to a trust whose earnings go to charity for a certain period, after which the trust corpus reverts to the donor or some other party

May be a useful income tax savings approach

Front 15

Charitable Lead Annuity Trust

Back 15

A certain dollar amount is guaranteed to be paid to the charity at least annually

Front 16

Charitable Lead Unitrust

Back 16

A specified percentage amount as revalued annually is paid each year to the charity

Front 17

Charitable Gift Annuties

Back 17

A contract entered into between a donor and a qualified charity whereby the charity makes payments to a non-charitable individual based on a donor's deferred charitable gift

Qualifies for tax deduction; income tax deduction immediate