I have had expereinces where the CRUT was funded over a period of time due to illiquid assets in the estate as well as just plain old estate administration time. In all instances, the CRUT Trustee made a partial distribution to the CRUT beneficiary. I am not aware of any code that prohibits partial CRUT distributions.

Indeed, I have several clients who have provided for periodic additions to their CRUTs, and the language of the agreement permits income distributions immediately. The Regs and the IRS prototype forms specificially include language that permits adjustments in the income in the event that a subsequent tax or accounting audit discloses that an error was made in the original calculation; other provisions direct how the income from later additions are to be handled.

Sounds like hokum. But, was the funding a via pecuniary bequest, specific bequest or otherwise? Properly drafted, the CRUT will not allow for the payment of estate taxes out of the portion used to fund the CRUT. Therefore, any angst about not having $ for additions to taxes should not preclude a funding and disribution to the income beneficiary. But, was the CRUT properly drafted?

Is the Executor also the drafting attorney?

I certainly can't speak to any legal issues, but the CRT regulations contemplate payments directly from the estate or formerly revocable trust in lieu of CRT payments, and partial funding during administration. See Treas. Reg. §1.664-1(a)(5)(iii).

It is my understanding and I believe mandated by the IRC that payments must be made unless the CRUT is actually a Flip CRUT and is in the net income phase. Then distributions of income must be distributed. How do you know when a trust is fully funded. Maybe with this testamentary you know the assets intended for the trust but what will they be worth. I think the trust would fail IRS scrutiny and would be disqualified as a charitable trust if payments are not being made. I am not aware of any acceptable specific language included in a CRUT that would allow the delay of payments. The only way I have found to delay payments for a net income trust would be to invest in non-income producing vehicles. No way to delay CRUT payments!

We had a funding of the remainder after other disposition to a testamentary CRT. We thus had issues with awaiting tax clearance (not to mention the circular calculation of the amount of the remainder due to the charitable interest implied by the CRT). The trustee determined to fund a partial level with retainage for final funding when the tax clearance was received.

In making the partial and initial funding, there is a requirement to make a make up distribution from the CRT from the date of death to provide the beneficiary with the value due them to make up for the delay.

Yes, I do remember reading in the will of my Father-in-law that there is a paragraph that says something about deferred income from the Trust until the Trust was fully funded. So, this means we will have to wait till that happens, right.

Seeking the advise of an attorney sounds like the thing to do here, but my Father-in-laws will specifies that if anyone named in his will challenges the will for whatever reason that their Trust would be revoked. Not that I or my wife would be challenging the will.

This depends partly on what the law of the particular state allows, but the federal tax regulations do not require a trustee of a CRT to postpone distributions until the end of the year in which the trust is completely funded. They do ALLOW it to do so. See Reg. 1.664-1(a)(5). Regardless of when distributions begin, if the trustee finds that it has distributed too much, it must recover the excess from the beneficiary (directly or by withholding it, and appropriate interest, from future payments), and if it distributed too little, it must make up the difference and pay interest on the postponed amounts.

In this case the trustee may be concerned that a future IRS audit might generate additional estate tax liability that, in turn, would reduce the amount passing to the trust. That would not prevent the trustee from making interim distributions based on some lower trust value that it considers "safe". A cautious trustee may want approval from the charity that will take the remainder, as well as the beneficiary's written agreement to repay any overpayments; but unless state law is unusually restrictive, nothing in the federal rules appears to prevent the trustee from starting limited unitrust payments before the estate tax issues are completely ironed out.

Not legal advice, just observations.

Dean, I think you are correct because I know in my Father-in-laws will he had many acres of Timber land in Arkansas, which was appraised by some Appraisal Firm. The Attorney stated that the only doubt about any assets of the estate was the valuation of the Timber land. He said the IRS might question this appraisal. Thanks for the advise. I am going to call up the attorney for the Trust and ask for partial distribution.

Kathleen and everyone else who has comments, I called the attorney for the Charitable Organization that is responsible for the administration of the Trust and they did agree to start distributing benifits by the end of this year. My Father-in-laws will had set up five Trusts in his will for different members of his family. The attorney said that their organizations policy though was to normally wait until a Trust is fully funding before starting distribution of benifits, but due to the fact that all of the other beneficiaries wanted distributions right away that they could start distributions by the end of this year.

Thank you everyone for your comments, you've been a great help and I really do appreciate it very much!