Elisabeth A. Koenig
Ms. Elisabeth A. Koenig was educated at the University of Pittsburgh (B.A. in Linguistics and Anthropology) and the University of Florida College of Law (J.D. and LL.M. in Taxation). Ms. Koenig focuses her practice on estate and charitable planning for high net worth individuals; advising clients on matters such as tax planning, wealth preservation, business planning, and charitable planning.
Prior to joining K&A, Ms. Koenig practiced estate planning and corporate law with a large law firm in Atlanta. She is licensed to practice law in Florida and Georgia.
Look Who's Forty: The CRT at Middle Age
For many decades, donors have used Charitable Remainder Trusts ("CRTs") to balance their donative intent with a need for a continued income stream. Without a CRT, a donor who cannot afford to make a large gift during life would simply leave assets to charity in his Last Will and Testament. However, a CRT allows the donor to make his gift during life while retaining an income stream. In addition to the satisfaction of seeing his contemplated gift come to fruition, the CRT allows a donor to realize both income and estate tax benefits. This is particularly true if a donor holds property that could be subject to capital gains tax. The tax benefits of a CRT often allow donors to make a more generous gift than they initially thought possible!
Over time, Congress and the Internal Revenue Service ("IRS" or "Service") have shaped CRTs into the devices we use today. Some important legislative milestones include the Tax Reform Act of 1969 ("TRA 1969"), the Technical and Miscellaneous Revenue Act of 1988 ("TAMRA"), the Taxpayer Relief Act of 1997 ("TRA 1997"), the Tax Relief and Health Care Act of 2006 ("TRHCA"), and the Pension Protection Act of 2006 ("PPA"). Additionally, the IRS has issued numerous pronouncements affecting CRTs, including Treasury Regulations ("Regulations" or "Regs") which followed on the heels of legislation, Revenue Procedures, Private Letter Rulings ("PLRs"), and Technical Advice Memoranda ("TAMs"). This paper will explore how key events have shaped CRTs over time, leading to the charitable remainder trusts as we know them today.
In preparing this paper, the authors had the privilege of speaking with Conrad Teitell, who has been instrumental in shaping legislation and regulations governing CRTs. Conrad currently practices in the Stamford office of the law firm of Cummings & Lockwood and is a nationally recognized legal practitioner, author and lecturer in the trusts and estate field. He is the recipient of the American Law Institute/American Bar Association's Harrison Tweed Award for Special Merit in Continuing Legal Education and is an adjunct professor at the University of Miami School of Law. Listed in the Best Lawyers in America, Conrad is a Fellow of the American College of Trust and Estate Counsel, and is the author of the five-volume treatise, Philanthropy and Estate Planning.
Conrad has been active for the past 40 years in working with IRS and testifying before Congress; of particular interest to us is his testimony before the Senate Finance Committee at the TRA 1969 hearings. Conrad was a member of a small 501(c)(3) group, along with Presidents from 19 colleges and universities, who visited the White House and Congress, speaking with such leaders as Arthur Burns and Russell Long. We have the privilege of being able to incorporate Conrad's unique historical insights into this article (see designated boxes throughout) and adding some of our own.
Gift of an Income Interest in a Charitable Gift Annuity
Law Could Prevent or Discourage Charitable Gifts in 2010
Gifts to some charitable vehicles such as a CRT, CGA, PIF, or retained life estate may be subject to gift taxes and may require restructuring as a result of Section 2511(c), which was enacted as part of EGTRRA. This provision is only a concern for 2010, or for any year during which there is no estate tax.
Investment in Foreign Currency
Once the revaluation occurs, Harry should consider contributing the dinars to a CRT, of which Harry and Wanda are income beneficiaries, before he sells the dinars. Gain on the sale of dinars by the CRT is not recognized for tax purposes because the CRT is a tax-exempt entity. Thus, Harry could defer the tax consequences of the sale, and pay income taxes only when he and Wanda receive payments from the CRT. Further, certain types of CRTs may provide greater opportunity to regulate the timing and flow of income to our donors and to grow assets tax-free.