I want to recite the facts differently assuming I read them correctly. Client has created a revocable trust. She is her own trustee. There is a successor trustee named in the trust document. Upon her death, the successor trustee will be dealing with illiquid trust assets. The successor trustee wants to begin the duty of funding the charitable remaindertrusts/bequests under the former revocable trust but prefers not to, and advisedly so, do so with illiquid assets. The successor trustee approaches a third party lender, borrows from that lender, and pledges trust assets. The successor trustee then proceeds to partially fund the charitable remainder trusts that are the beneficiaries under the trust with cash the trustee of the decedent's trust borrowed. The CRTs are not debtors on the loan. As the illiquid trust assets are sold, the trust loans are extinguished and the successor trustee of the trust continues to fund the CRTs. It would be good to determine whether any income from the illiquid assets s/b distributed elsewhere, such as to a specific devisee or to a marital trust, rather than debt service. Also, heed Mr. Henry's advice not to deal with debt service on assets within a CRT.

I'm a little confused. Most of the CRTs that I deal with the donor is looking for a bypass of capital gains. It sounds to me that if a loan is used to fund the CRTs then there wouldn't be any capital gains bypass when the property is sold to pay off the loan.

If a bypass of capital gains is not an issue, then I'm not sure what the question is.

The successor trustee approaches a third party lender, borrows from that lender, and pledges trust assets. The successor trustee then proceeds to partially fund the charitable remainder trusts that are the beneficiaries under the trust with cash the trustee of the decedent's trust borrowed. The CRTs are not debtors on the loan.

There is a successor trustee named in the trust document. Upon her death, the successor trustee will be dealing with illiquid trust assets. The successor trustee wants to begin the duty of funding the charitable remaindertrusts/bequests under the former revocable trust but prefers not to, and advisedly so, do so with illiquid assets. The successor trustee approaches a third party lender, borrows from that lender, and pledges trust assets.

Thank you.