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§ 12.1 DEFINITIONSpredeceased W, at which time the trust became irrevocable. For purposes of the charitable trustrules, the trust was deemed created on May 26, 2005, because that was the earliest date onwhich H was not treated as the owner of the entire trust. The trust became a CRT on May 26,2005, because it met the definition of a CRT from its creation. aaReg. § 1.664-1(a)(6), example (1).EXAMPLE 12.1 (CONTINUED)EXAMPLE 12.2The facts are the same as in Example 12.1, except that H retained the inter vivos power to revokeonly one-half of the trust. For purposes of the charitable remainder trust rules, the trust wasdeemed created on September 19, 2004, because on that date the grantor was not treated as theowner of the entire trust. Consequently, a charitable deduction was not allowable either at thecreation of the trust or at the death of H, because the trust did not meet the definition of a CRTfrom the date of its creation. This is so because from the date of its creation, the trust was subjectto a partial power to revoke on that date. aaReg. § 1.664-1(a)(6), example (2).EXAMPLE 12.3The facts are the same as in Example 12.1, except that the residue of H’s estate was to be paidto the trust and the trust was required to pay H’s debts. The trust was not a CRT at H’s deathbecause it did not function exclusively as a CRT from the date of its creation—which, in thiscase, was the date it became irrevocable. aaReg. § 1.664-1(a)(6), example (3).EXAMPLE 12.4In 2004, H transferred property to Trust A, over which he retained an inter vivos power ofrevocation. Trust A, which is not a CRT, was to provide income or corpus to W until the deathof H. Upon H’s death, the trust was required by its governing instrument to pay the debts andadministrative expenses of H’s estate, and then to terminate and distribute all of the remainingassets to Trust B, which met the definition of a CRT.Trust B was a CRT from the date of its funding because it functioned as a CRT from its creation.For purposes of the estate tax charitable deduction, a Trust B was deemed created at H’s death ifthe obligation to pay the annuity amount began on the date of H’s death. For purposes of theCRT rules, Trust B became a CRT as soon as it was partially or completely funded.Consequently, unless Trust B has unrelated business taxable income, b the income of the trust isexempt from federal tax and any distributions by the trust, even before it is completely funded,are governed by the CRT rules. Any distributions made by Trust A, including distributions to arecipient in respect of annuity amounts, are governed by general trust rules c rather than theCRT rules. daIRC § 2055. See Chapter 8.bSee §§ 12.7, 3.5.cIRC subch. J, ch. 1, subtit. A.dReg. § 1.664-1(a)(6), example (4). 413