Hello and thank you for your question.
Starting in 1989, the IRS has published forms for several versions of
charitable remainder annuity trusts (CRATs). In 2003, the IRS
released new revenue procedures, Rev. Procs. 2003-53 through 2003-60,
stating that it was updating the old ones and adding new sample forms
for additional types of trusts.
If the IRS forms are followed, deductions will be available to
citizens and residents of the U.S. The IRS will recognize as qualified
CRATs any trust using these forms if (1) the trust operates
consistently with the terms of the trust, (2) it is a valid trust
under local law, (3) the alternatives given in the revenue procedures
are "properly integrated into" the sample forms, and (4) provisions
other than those in the revenue procedure that may be used are
substantially similar to those in the revenue procedure.
The Planned Giving Design Center has a good article on the subject,
with handy lnks to the eight revenue procedures containing model
agreements.
Exploring the New Model Charitable Remainder Annuity Trust Forms
http://www.pgdc.com/braf/item/?itemID=91086
If you are interested in funding a CRAT that will pay you an annuity
for your life, use the first model, Sample Inter Vivos CRAT for One
Measuring Life (Rev. Proc. 2003-53),
http://www.pgdc.com/braf/link/?pgdcID=2402
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On this ___ day of ___, 20___, I, ___ (hereinafter "the Donor"),
desiring to establish a charitable remainder annuity trust, within the
meaning of Rev. Proc. 2003-53 and § 664(d)(1) of the Internal Revenue
Code (hereinafter "the Code"), hereby enter into this trust agreement
with ___ as the initial trustee (hereinafter "the Trustee"). This
trust shall be known as the ___ Charitable Remainder Annuity Trust.
1. Funding of Trust. The Donor hereby transfers and irrevocably
assigns, on the above date, to the Trustee the property described in
Schedule A, and the Trustee accepts the property and agrees to hold,
manage, and distribute the property under the terms set forth in this
trust instrument.
2. Payment of Annuity Amount. In each taxable year of the trust during
the annuity period, the Trustee shall pay to [permissible recipient ]
(hereinafter "the Recipient") an annuity amount equal to [a number no
less than 5 and no more than 50 ] percent of the initial net fair
market value of all property transferred to the trust, valued as of
the above date (that is, the date of the transfer). The first day of
the annuity period shall be the date the property is transferred to
the trust and the last day of the annuity period shall be the date of
the Recipient's death. The annuity amount shall be paid in equal
quarterly installments at the end of each calendar quarter from
income, and to the extent income is not sufficient, from principal.
Any income of the trust for a taxable year in excess of the annuity
amount shall be added to principal. If the initial net fair market
value of the trust assets is incorrectly determined, then within a
reasonable period after the value is finally determined for federal
tax purposes, the Trustee shall pay to the Recipient (in the case of
an undervaluation) or receive from the Recipient (in the case of an
overvaluation) an amount equal to the difference between the annuity
amount(s) properly payable and the annuity amount(s) actually paid.
3. Proration of Annuity Amount. The Trustee shall prorate the annuity
amount on a daily basis for any short taxable year. In the taxable
year of the trust during which the annuity period ends, the Trustee
shall prorate the annuity amount on a daily basis for the number of
days of the annuity period in that taxable year.
4. Distribution to Charity. At the termination of the annuity period,
the Trustee shall distribute all of the then principal and income of
the trust (other than any amount due the Recipient or the Recipient's
estate under the provisions above) to [designated remainderman ]
(hereinafter "the Charitable Organization"). If the Charitable
Organization is not an organization described in §§ 170(c), 2055(a),
and 2522(a) of the Code at the time when any principal or income of
the trust is to be distributed to it, then the Trustee shall
distribute the then principal and income to one or more organizations
described in §§ 170(c), 2055(a), and 2522(a) of the Code as the
Trustee shall select, and in the proportions as the Trustee shall
decide, in the Trustee's sole discretion.
5. Additional Contributions. No additional contributions shall be made
to the trust after the initial contribution.
6. Prohibited Transactions. The Trustee shall not engage in any act of
self-dealing within the meaning of § 4941(d) of the Code, as modified
by § 4947(a)(2)(A) of the Code, and shall not make any taxable
expenditures within the meaning of § 4945(d) of the Code, as modified
by § 4947(a)(2)(A) of the Code.
7. Taxable Year. The taxable year of the trust shall be the calendar year.
8. Governing Law. The operation of the trust shall be governed by the
laws of the State of ___. However, the Trustee is prohibited from
exercising any power or discretion granted under said laws that would
be inconsistent with the qualification of the trust as a charitable
remainder annuity trust under § 664(d)(l) of the Code and the
corresponding regulations.
9. Limited Power of Amendment. This trust is irrevocable. However, the
Trustee shall have the power, acting alone, to amend the trust from
time to time in any manner required for the sole purpose of ensuring
that the trust qualifies and continues to qualify as a charitable
remainder annuity trust within the meaning of § 664(d)(1) of the Code.
10. Investment of Trust Assets. Nothing in this trust instrument shall
be construed to restrict the Trustee from investing the trust assets
in a manner that could result in the annual realization of a
reasonable amount of income or gain from the sale or disposition of
trust assets.
The foregoing trust was signed by the Donor and Trustee on the date
first above written.
____________________
, Donor
____________________
, Trustee
[The IRS doesn't require a Notary acknowledgement, but since the trust
must satisfy state law, and some states might require a trust of this
sort to be notarized, I suggest you do so]
As far as filing requirements, CRATs must file Form 5227 each year,
and is likely also to file a trust income tax return, Form 1041.
When you file the first return for a charitable remainder annuity
trust or unitrust, include:
A copy of the trust instrument, and
A written declaration under penalties of perjury that it is a true and
complete copy.
http://www.irs.gov/instructions/i5227/ch01.html
http://www.irs.gov/pub/irs-pdf/f5227.pdf
http://www.irs.gov/pub/irs-pdf/f1041.pdf
Search terms used:
"model charitable remainder"
"charitable remainder" file form site:irs.gov
Thanks again for letting us help.
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