We are working with a donor that is putting a building he owns in a Charitable Remainder Trust. If the Trust wants to sell this building in the future are they allowed to carry a contract with a buyer or does it have to be a cash out sale?
Thanks for your assistance.
Charitable Remainder Trust selling a building on contract
1. The terms of the CRT, particularly the Trustee Powers provisions; 2. Any state law provisions which may apply (e.g., UTC); and, 3. IRS Regs. governing CRTs.
Going in reverse order, I am not aware of any IRS Regs. or other authority governing CRTs that would prevent a transaction like this; in fact, I have had at least one transaction I strutured with an installment sale of land by a CRUT, and the IRS accepted all tax returns for close to 10 years, and never questioned the transaction. However, I have not conducted any recent research on this issue.
Secondly, be sure to review any applicable state law provisions regarding Trustees' powers to sell real estate, lend money, etc.
Third, (and I really think this is the crucial issue), make sure the CRT document has proper authority for the Trustees to sell real estate owned by the CRT, take back a mortgage for the balance of the sale proceeds, set the terms of notes and security instruments for loans made, etc. This is as much of a real estate law issue as it is a "trust law" issue (having done a lot of work in both areas, I am sensitive to both issues! ;-).
Finally, all of the normal admonitions about CRT transactions apply, such as confirming there's no "pre-arranged" sale, that the donation of the land is a true "gift" to the CRT by the donor, etc.
Larry J. Ford Attorney at Law Hayeville, NC 828-389-3726 fordlaw@usa.net