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IRS Publishes Charitable Lead Annuity Trust Samples

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The Internal Revenue Service has released two batches of guidance of interest to advisors in the charitable planning market.

The new revenue procedure documents provide annotated sample declarations of trust provisions and alternate provisions for “charitable lead annuity trusts,” or “CLATs.”

CLATs first make annuity payments to one or more charities, then make payments to recipients that are not charities.

The first revenue procedure, Revenue Procedure 2007-45, explains how to set up CLATs that are created while the donor is still alive.

Following the rules for “grantor and nongrantor inter vivos CLATs,” or CLATs created while a donor is alive, affects whether the gift of the inter vivos CLAT interest qualifies for a gift tax charitable deduction or an estate tax charitable deduction, IRS officials write in the revenue procedure.

The second revenue procedure, Revenue Procedure 2007-56, explains how to set up “testamentary CLATs, or CLATs that are created when an individual dies.

Following those rules affects whether value of the CLAT interest can be deducted from the donor’s estate and whether payments to the charitable lead beneficiary will be deductible from the gross income of the trust, officials write.

The new revenue procedures create “safe harbor” rules aimed at planners and taxpayers that want to use typical types of CLAT arrangements, officials write.

The IRS usually will not issue letter rulings on whether CLATs created by individuals qualify for income, estate or gift tax deductions, but it will issue letter rulings concerning the tax consequences of using trust provisions that are substantially different from the provisions discussed in the new revenue procedures, officials write.


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