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§ 5.4 CHARITABLE REMAINDER TRUSTS4. The trust cannot qualify if the annuity for a year is greater than 50 percentof the initial net fair market value of the trust’s assets.5. The annuity must be payable at least annually.6. The annuity must be payable either for a term of years (up to 20) or for thelife of the noncharitable beneficiary (or beneficiaries).7. The trust cannot pay any amounts, other than the annuities, to or for theuse of any person other than the charitable organization that is theremainder beneficiary.8. The value of the remainder interest must be at least 10 percent of the initialnet fair market value of all property placed in the trust.9. The remainder interest created by the trust must be transferred to or forthe use of the charitable organization(s) involved or retained by the trustfor such use.There are other requirements, but these are the fundamental ones.A donor cannot make any additional contributions to a charitable remaindertrust. A donor may, however, create as many charitable remainder annuity trustsas may be desired.A trust does not qualify as a charitable remainder annuity trust if any personhas the power to alter the amount to be paid to any named person, other thanthe charitable beneficiary, if that power would cause any person to be treated asthe owner of the trust, or any portion of it, under the grantor trust rules. Thetrust may not be subject to a power to invade, alter, amend, or revoke for thebeneficial use of a person other than a charitable organization.According to the IRS, there cannot be a federal income tax charitable deductionfor a transfer to a charitable remainder annuity trust when there is morethan a 5 percent probability that a noncharitable beneficiary will receive annuitypayments to the extent that the trust becomes depleted, therefore leaving nothingfor the charity holding the remainder interest.(ii) Determining the Charitable Deduction. The charitable deduction resultingfrom a contribution by means of a charitable remainder annuity trust is determinedby use of monthly interest rates and tables promulgated by the Departmentof the Treasury. (Once that potential deduction is determined, the actualdeduction depends on compliance with the general charitable giving rules.)These tables yield a number called a factor, which when multiplied by the totalamount transferred into the trust provides the deductible portion.Three elements must be taken into account in determining this charitablededuction:1. The age of the income beneficiary (or ages of the income beneficiaries) ifthe term of the trust is measured by a life (or lives), or the term of thetrust, if it is for a stated period of years.2. The annuity percentage.3. The date or dates during the year when payment to the income beneficiary(or beneficiaries) will be made. 151