Early Termination of Charitable Remainder Trusts: Tax Consequences and Planning Opportunities

Drafting Provisions That Allow Termination; Navigating Methods of Termination, State Law Considerations and Tax Complexities

Recording of a 90-minute CLE/CPE webinar with Q&A

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Conducted on Monday, November 23, 2015

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers with a detailed and practical guide to the early termination of charitable remainder trusts (CRTs). The panel will discuss the reasons for terminating a CRT early, drafting questions and provisions that allow for early termination of a CRT, methods of termination, state law considerations, and tax consequences and planning opportunities arising from termination of a CRT.

Description

In certain circumstances the beneficiaries of a CRT will want to terminate the trust prior to the end of the specified term of the trust. CRTs generally are irrevocable, but it is possible to terminate a CRT early if applicable law permits and all interested parties consent. Tax counsel must know not only the drafting terms to allow early termination of a CRT when the trust is drafted, but also how to structure and complete a CRT termination in accordance with IRS regulations and state law.

The IRS considers certain early terminations to be a sale or exchange between the income and charitable remainder beneficiaries, generally resulting in taxable capital gains to the income beneficiaries. Tax counsel and advisers need to consider current income tax impact to the beneficiaries as part of any termination. Further, the Service will carefully examine any termination transaction that it believes is a scheme designed to avoid capital gains. Finally, tax counsel should also be aware of self-dealing issues that can arise in certain early terminations of CRTs.

Listen as our experienced panel provides a thorough examination of not only the drafting requirements, but also of the tax considerations in structuring an early termination of a CRT.

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Outline

  1. Reasons to consider termination
  2. Forms of terminations (assignment termination vs. actuarial split)
  3. State law factors and restrictions
  4. IRS position on terminations

Benefits

The panel will discuss these and other key questions:

  • When is it appropriate to consider early termination of a CRT?
  • What are the available methods for terminating a CRT?
  • What types of terminations will run afoul of IRS regulations?
  • What are the state law considerations in terminating a CRT?

Faculty

Seth R. Kaplan
Seth R. Kaplan
Partner
Berger Singerman

Mr. Kaplan concentrates his practice in the areas of personal tax, planned giving, and estate planning for high...  |  Read More

Brian M. Sweet, Esq.
Brian M. Sweet, Esq.
Patterson Belknap Webb & Tyler

Mr. Sweet counsels clients on the design and implementation of sophisticated estate plans, includingdrafting...  |  Read More

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