1. T/FA CRUT is a charitable trust that provides a donor or other person with a set amount of income each year for the duration of the charitable trust.
2. The T/FA Charitable Gift Annuity is a charitable trust that provides a variable amount of income for one or more lives with the remainder of the trust going to one or more charities.
3. T/F The most a donor can transfer to their spouse upon death without incurring estate tax on the transfer is $5 million.
4. T/F If a donor itemizes deductions, the donor may claim a charitable income tax deduction for the full amount of a direct cash donation to charity, provided the deduction does not exceed the donor’s taxable income for this year.
Did you answer “true” to any of the questions? If so, read on:
1.False. A CRUT (Charitable Remainder Unitrust) is a charitable trust that provides a variable amount of income for one or more lives (or a specified number of years) with the rest of the trust going to one or more charities.
2. False. A charitable gift annuity is an annuity involving an agreement between a charity and one or two people, requiring the charity to provide a specific amount each year to “annuity recipients” for life.
3. False. The “unlimited marital deduction” allows any US citizen the ability to transfer an unlimited amount to their US citizen spouse, during life and upon death. For example, a wife could give her husband $1 billion and still owe no gift or estate taxes. However, under this same scenario, if neither spouse implemented other planning, there could be a huge estate tax problem if the second spouse dies. Careful planning while both spouses are alive is the best way to address possible future tax consequences.
4. False. Assuming a donor itemizes deductions, the donor can only claim an income tax deduction for cash donations to a qualified charity up to 50 percent of the donor’s adjusted gross income (AGI). For gifts of appreciated property, the maximum deduction is reduced to 30 percent of the donor’s AGI. However, if the donor is unable to use all of their charitable deduction in the year of the gift (whether in cash or appreciated assets), the donor can carry over the deduction for five more years.
This article is for informational purposes only. Readers should consult a qualified professional advisor for assistance.