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CHARITABLE REMAINDER TRUSTSreceive the income payments. The unitrust was to have been a NIMCRUT; theunitrust amount was to have been at least actual trust income, with the percentageset at 11 percent. In years in which the income was in excess of the percentage,additional income could be paid to the income beneficiaries to make up forshortfalls in prior years.In this case, the IRS concluded that the eight individuals were associates.Two facts were cited to support this conclusion: each of the eight individualswould be making contributions to the trust and the trust would last until thedeath of the last of them. The IRS also decided that these associates would bepooling their assets with an object to carry on business and divide the gainsfrom the business. That conclusion was rested on the fact that the trustee wouldhave the power to “vary the investment of the grantors by investing and reinvestingthe assets in the trust.” The recipients of the unitrust amount would“share in the profits derived from the joint investment of their assets” held bythe proposed trust.In another instance, the IRS, noting that the trustee would have the power tovary the investment of the grantors (an S corporation and its sole shareholder)in a proposed trust, and that the grantors, as recipients of the unitrust amount,would share in the profits derived from joint investment of their assets, concludedthat such an arrangement could not appropriately be classified as a trust. 54Inasmuch as the entity could not constitute a trust, the IRS ruled that it couldnot be a CRT. 55It is common for a married couple to establish a CRT, with both individualsnamed as trustees and income interest beneficiaries. If these individuals subsequentlydivorce, a court may split the trust into two separate trusts, one trusthaving one of these individuals as its sole trustee and income beneficiary andthe other trust having the other individual as its sole trustee and income beneficiary.The court order should also provide that each individual must name theother as successor trustee and continuing income beneficiary when one ofthese individuals predeceases the other. In these circumstances, the originalCRT and the two resulting CRTs will not fail to qualify as charitable remaindertrusts. 56 If a CRT is divided pursuant to a will settlement, the estate tax charitablecontribution deduction essentially is based on the value of the assets allocated tothe resulting trusts. 57§ 12.2 CHARITABLE REMAINDER ANNUITY TRUST RULESA charitable remainder annuity trust is a trust that complies with the foregoingrules 58 and the rules described in this section. 5954 In so concluding, the IRS cited Commissioner v. North Am. Bond Trust, 122 F.2d 545 (2d Cir. 1941), cert.denied, 314 U.S. 701 (1942).55 Priv. Ltr. Rul. 200203034.56 See, e.g., Priv. Ltr. Rul. 200035014.57 See, e.g., Priv. Ltr. Rul. 200229046.58 See § 12.1.59 IRC § 664(d)(1); Reg. § 1.664-2(a). 416