How Long Can Trusts Last?

The payment of a charitable remainder annuity trust or unitrust may not extend beyond the lives of one or more named individuals and a term greater than 20 years.  For example, the governing instrument may not provide for a payment to Adam for life, then to Ben for a term of years, with Ben’s share payable to his estate in case he does not survive Adam for the full term, because the period of the payment may extend beyond both the lives of Adam and Ben and a term more than 20 years.  On the other hand, the governing instrument may provide for a payment to Adam for life, then to Ben for life or a term less than 20 years, whichever is shorter, since it is not possible for the period of payment to extend beyond the lives of Adam and Ben [Reg. §§1.664-2(a)(5)(i), 1.664-3(a)(5)(i)].  This may be an attractive option for an older donor who wants a family member or friend to benefit in the event the donor dies shortly after establishing the trust.  However, it’s important to remember that the value of the charitable remainder must be at least 10% of the net fair market value of the assets transferred to the trust on the date of the gift [Code §§664(d)(1)(D), 664(d)(2)(D)].


<back


Copyright © R&R Newkirk. All rights reserved.
Location

200 West Fourth St.
Cincinnati, OH 45202
Directions

Contact

513-241-2880
Email Us