September 23, 2021

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:
Drafting. This stage culminates in the execution of a document that serves as the trust instrument.
Funding. This stage encompasses the transfer of assets to the trust.
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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