The early termination of CRTs has become very popular in recent years, particularly for donors that have come under financial pressure. Generally, the consent of all parties, including the remainder charity must be obtained, as well as the Attorney General, who might require court approval. There are special rules as to how to figure the amounts to be distributed to the noncharitable beneficiaries and the remainder charity, particularly in the case of NICRUTs and NIMCRUTs. The main advantage to the charity is that it gets its hands on money that it would otherwise have to wait many years to received. I am in the process of doing one right how, where the noncharitable beneficiaries are receiving over $5 million.

Let me know if I can help or be of any assistance.

Richard L. Fox, Esq. rfox@dilworthlaw.com Parnter, Dilworth Paxson LLP Visiting Professor of Philanthorpy - The American College

I just started researching this issue and have found some helpful language in PLR 200408031, PLR 200403051, PLR 200127023, and PLR 200314021.

If I am reading the rulings correctly (and I'm sure Richard can speak to this), it appears that the taxpayer is treated as if he is selling his interest to the charitable beneficiary and that the amount the taxpayer would realize for federal income tax purposes would be the amount of money and FMV of the property received by the Taxpayer as determined under Section 1001 rather than Section 664. The taxpayer is treated as though he no basis in his interest in the trust, and the taxpayer realizes gain under Section 1001(c), which is subject to taxation as long-term capital gain.

What I haven't been able to determine is whether it makes a difference if the taxpayer who is terminating the CRUT is the original settlor/donor, or if the taxpayer is a non-charitable beneficiary. In my case, the settlor/donor has passed away, and her children have lifetime interests in the CRUTs. Do the same rules apply to them as to settlor/donors? Any thoughts?

Thank you,

Danielle Fischer

Can also be accomplished by converting to a Charitable gift annuity which would provide the donor an additional tax deduction, an income stream for life at a fixed rate depending on his or her age(s) and also release a portion of the corpus immedetely directly to the charity who is in need now rather then later.

From Greg Chona in Sarasota, FL. gchona@metlife.com