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Charitable Remainder Trusts: When Things Go WrongCharitable Remainder Trusts: When Things Go Wrong

How to anticipate and avoid errors and mistakes.

Jonathan Tidd

September 23, 2021

24 Min Read
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A charitable remainder trust (CRT) is a split-interest trust that meets a specific federal tax law definition throughout its term. Errors can occur that cause a split-interest trust not to meet the definition of a CRT. Sometimes mistakes are made that don’t violate the definition of a CRT but nonetheless cause problems. Here’s how you can anticipate and avoid such errors and mistakes.

Three Stages

A CRT has three stages to its existence:

  1. Drafting. This stage culminates in the execution of a document that serves as the trust instrument. 

  2. Funding. This stage encompasses the transfer of assets to the trust.  

  3. Administrative. This stage commences with the initial funding of the trust and terminates on the final distribution of trust assets.

Things can go wrong in all three stages.

It’s important to note that a CRT comes into existence for federal tax purposes when the trust first receives property (securities, cash, etc.) from the settlor.1 Prior to that time, anything that’s gone wrong, such as a drafting error, is generally fixable assumin...

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About the Author

Jonathan Tidd

Jonathan G. Tidd  is an attorney whose practice is limited to advising charitable organizations on gift planning issues.  He has been admitted by exam to the Connecticut, Illinois, Indiana, and New York Bars.  His clients include a wide range of educational, health care, arts, human rights and social service organizations.  His articles on charitable gift planning have appeared in THE JOURNAL OF TAXATION; ESTATE PLANNING; and other professional journals.  His office is in West Simsbury, Connecticut.