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§ 12.1 DEFINITIONSthe amount of a charitable contribution (or the actuarial value of any interest). 47A qualified contingency is any provision of a trust stating that, upon the happeningof a contingency, the annuity amounts or the unitrust amounts (as the casemay be) will terminate no later than the payments would otherwise terminateunder the trust. 48 For example, a qualified contingency was ruled to have arisenwhen a CRUT was created under these terms of a will; the unitrust amount wasto be paid to B, and the trust’s term was to end at the death of B or C, whicheveroccurred sooner. The provision in the will for the possible early termination ofthe unitrust amount constituted the qualified contingency. 49A CRT instrument 50 generally cannot be amended, except to ensure that itqualifies and continues to qualify as a CRT. Thus, for example, occasionally theIRS permits a trust document to be reformed to correct a drafting mistake—sometimes referred to as a scrivener’s error—without causing loss of qualificationof the trust as a CRT. 51(b) Trust RequirementA CRT must initially qualify as a trust for federal income tax purposes. The rulesto be considered in assessing whether an entity is an association taxable as a corporation,a partnership, or a trust focus on six characteristics: associates, anobjective to carry on business and divide the profits from it, continuity of life,centralization of management, limited liability, and free transferability of interests.52 Inasmuch as the last four of these elements are generally common to trustsand corporations, the attention in this regard is on the first two characteristics. Ifan entity has associates and a business purpose, it cannot be classified as a trustfor federal income tax purposes.In one of the rare instances in which this issue has arisen, the IRS ruled that aproposed trust, intended by its grantors to be a CRT, did not qualify as a trust fortax purposes in the first instance, and thus could not qualify as a CRT. 53 The trustwas to be established by eight individuals: husband, wife, and six grandchildren.Cast as a CRUT, it was to be funded with $2 million. The married couple wouldcontribute a little more than $1 million in money and appreciated securities; thebalance would be contributed by the six grandchildren, again in cash and appreciatedsecurities. Income from the trust would flow to the husband and wife fortheir joint lives, then to the survivor of them; thereafter, the grandchildren would47 IRC § 664(f)(2).48 IRC § 664(f)(3).49 Priv. Ltr. Rul. 9322031. A change was made, in 1999, in the tax regulations concerning CRTs pertaining tothe valuation of certain assets transferred to these trusts. These additions to the law are summarized elsewhere,for purposes of emphasizing them. See § 12.4(f).50 See Reg. § 1.664-1(a)(1)(iii)(e).51 See § 12.4(i). These types of errors can have more than adverse tax consequences—they can lead to malpracticelitigation against the lawyer who prepared the trust document. See, e.g., Priv. Ltr. Rul. 9804036.The CRT rules were enacted in 1969. For certain testamentary trusts created earlier, there is an income taxdeduction for amounts permanently set aside for a charitable purpose. IRC § 642(c)(2). An illustration of atrust that did not comply with this rule is in Samuel P. Hunt Trust v. United States, 2003 WL 23095996 (D.N.H.2003) (unpublished).52 Reg. § 301.7701-2(a)(2).53 Priv. Ltr. Rul. 9547004. 415