The following powers provided by a trust instrument to the grantor did not disqualify a charitable remainder unitrust: (1) the power to terminate all or a portion of the trust early and distribute the trust corpus to any charity, (2) the power to change the charitable remainderpersons, (3) the power to limit the type of assets the trust may accept or hold (provided the restriction did not violate Treas.
The IRS has privately ruled that the donor/unitrust recipient of a CRUT could donate his entire unitrust interest in an existing CRUT to the charitable remainderperson in consideration for a gift annuity that would be payable to him.
The gift tax cost is exactly the same as if the grantor had made a direct gift of the property to the remainderpersons
. In place of a GRIT, the grantor retained unitrust (GRUT) and the grantor retained annuity trust (GRAT) are available to leverage gifts between generations.
The first people to receive distributions are called "primary beneficiaries." The class of beneficiaries who receives what remains when a trust terminates are called "remainderpersons
Under the Revised Uniform Principal and Income Act, the trustee could then allocate some of that appreciation to income to make up for the smaller yield, subject to the trustee's fiduciary duty to treat the income beneficiary and the remainderpersons
The trustees had only those powers that the trust instrument expressly granted, which were typically few, since the trustees' job was simply to hold and then to convey to the remainderpersons. Stakeholder trustees did not need to transact.
These remainderpersons had during the settlor's lifetime precisely that bare expectancy that characterizes the interest of a devisee under the will of a living testator.
The terms provide for a successor trustee to be appointed at the settlor's death, to hold and manage the property for the benefit of the remainderpersons. This successor trustee is functionally indistinguishable from a testamentary trustee appointed under the will of a decedent, which is one of the classical modes of creating a conventional three-party trust relationship.
The primary disadvantage of using a QPRT is that the trust's remainderpersons do not get a step-up in basis for the home when the term interest holders (e.g., parents) die.
From an income tax standpoint, the QPRT loses some of its attractiveness if the remainderpersons intend to sell the home once they take possession (assuming the transferor survives until his term interest expires).
(If the holder of a right to make a current withdrawal from the trust allows the amount the holder could take to instead stay inside the trust, the holder is really making a gift to those who will eventually receive those amounts, the trust's remainderpersons
. Since the (possibly unknown) remainder persons did not have a power to withdraw the gift from the trust, the Crummey powerholder is deemed to have made a future interest gift, which does not qualify for the gift tax annual exclusion.