1. T/FA CRUT is a charitable trust that provides a donor or other person with a fixed amount of income each year for the life 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 at 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 gift to charity, as long as the deduction does not exceed the donor’s taxable income for that year.
Did you answer “true” to any of the questions? If so, keep reading:
1.False. A CRUT (Charitable Remainder Unitrust) is a charitable trust that provides a variable amount of income for one or more lifetimes (or a specified number of years) with the remainder of the trust going to one or more charities.
2.False. A charitable gift annuity is an annuity that involves an agreement between a charity and one or two individuals, which requires the charity to provide a specified amount each year to “annuity recipients” for life.
3.False. The “unlimited spousal deduction” allows any US citizen the ability to transfer an unlimited amount to their US citizen spouse, during their lifetime and at death. For example, a wife could give her husband a billion dollars and still not owe 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 items 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 goods, 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 with a qualified professional adviser for help.