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§ 5.4 CHARITABLE REMAINDER TRUSTSpresent or perceived need for the income that the property provides and/orbecause of the capital gains taxes that the donor would incur if the propertywere sold. The planned gift is likely to be the answer in this situation, becausethe donor may satisfy his or her charitable desires and yet continue to receiveincome, perhaps on an enhanced basis, from the property. Moreover, the donorreceives a charitable contribution deduction for the gift of the remainder interest,which will reduce or eliminate the tax on the income from the gift property.Also, there is no regular income tax on the capital gain inherent in the property.Further, if the gift property is not generating sufficient income, the trustee of thesplit-interest trust may dispose of the property and reinvest the proceeds inmore productive property, which will enable the donor to receive more incomefrom the property than was the case prior to the making of the gift.§ 5.4 CHARITABLE REMAINDER TRUSTSThe most widespread form of planned giving involves a split-interest trustknown as the charitable remainder trust. 10 The term is nearly self-explanatory: theentity is a trust, in which has been created a remainder interest that is destined forone or more charitable organizations. Each charitable remainder trust arrangementis specifically designed for the particular circumstances of the donor(s),with the remainder interest in the gift property designated for one or more charitableorganizations.One or more income interests are also created in a charitable remaindertrust; thus, the charitable remainder trust is a split-interest trust.(a) General RulesA qualified charitable remainder trust must provide for a specified distributionof income, at least annually, to one or more beneficiaries (at least one of which isnot a charitable organization) for life or for a term of no more than 20 years, withan irrevocable remainder interest to be held for the benefit of, or paid over to,the charitable organization. 11 These beneficiaries are the holders of the incomeinterests and the charitable organization has the remainder interest; these interestsare defined with particularity in the charitable remainder trust agreement.The manner in which the income interests in a charitable remainder trust areascertained depends on whether the trust is a charitable remainder annuity trust ora charitable remainder unitrust. In the case of the charitable remainder annuitytrust, the income payments are in the form of a fixed amount (hence the termannuity). In the case of the charitable remainder unitrust, the income paymentsare in the form of an amount equal to a fixed percentage of the fair market valueof the assets in the trust.The charitable remainder annuity trust provides the advantage of a fixedreturn. The charitable remainder unitrust becomes attractive in the face of inflation,as the amount paid out is a function of the annual measurement of thevalue of the trust’s assets.10 The charitable remainder trust is the subject of Chapter 12.11 IRC § 664. 149