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CHARITABLE REMAINDER TRUSTSA trust that fails this maximum payout rule cannot constitute a CRT; instead,it is treated as a complex trust, so all its income is taxed either to its beneficiariesor to the trust.(d) Permissible Income RecipientsThe annuity amount must be payable to or for the use of a named person 77 or persons,at least one of which is not a charitable organization. 78 If the amount is to bepaid to an individual or individuals, all of them must be living at the time of creationof the trust. A named person or persons may include members of a namedclass, provided that, in the case of a class that includes any individual, all of the individualsmust be alive and ascertainable at the time of creation of the trust, unless theperiod for which the annuity amount is to be paid to the class consists solely of aterm of years. For example, in the case of a testamentary trust, the testator’s willmay provide that an amount shall be paid to her children living at her death. 79The IRS, however, approved an arrangement in which an otherwise qualifyingCRAT made distributions to a second trust, when the only function of thesecond trust was to receive and administer the distributions for the benefit ofthe named individual lifetime beneficiary of the trust, who was incompetent. 80The income beneficiary was regarded as receiving the distributions directlyfrom the first trust. Subsequently, the IRS adopted the position that a trust servingin this fashion for any income beneficiary would suffice (that is, irrespectiveof whether the individual income beneficiary was incompetent), 81 although thisstance was later abandoned. 82 Thus, this use of a CRAT to protect the assets of amentally incompetent individual and to ensure that the assets are used for theindividual’s benefit is the only circumstance in which the IRS will permit a trustto be an income interest beneficiary of a CRAT for the duration of an individual’slife. 83 The IRS formalized this position in a revenue ruling. 84A trust is not a CRAT if any person has the power to alter the amount to bepaid to any named person (other than a charitable organization), if the powerwould cause any person to be treated as the owner of the trust or any portion ofit, or if the grantor trust rules are applicable to the trust. 85 For example, the governinginstrument of a CRAT may not grant the trustee the power to allocate theannuity among members of a class unless the power falls within one of theexceptions to the rules concerning the power to control beneficial enjoyment. 8677 The term person is defined for federal income tax purposes in IRC § 7701.78 IRC § 664(d)(1)(A).79 Reg. § 1.664-2(a)(3)(i).80 Rev. Rul. 76-270, 1976-2 C.B. 194.81 Priv. Ltr. Rul. 9101010.82 Priv. Ltr. Rul. 9718030.83 See, e.g., Priv. Ltr. Rul. 9839024. A charitable remainder annuity trust may, however, pay income amounts toa second trust for a term of 20 years or less.84 Rev. Rul. 2002-20, 2007-17 I.R.B. 794.85 Reg. § 1.664-2(a)(3)(ii). Cf. § 12.2(d), text accompanied by note 93 (rule permitting retention by a grantor ofa testamentary power to revoke or terminate the interest of an income beneficiary other than a charitable organization).86 Reg. § 1.664-2(a)(3)(ii). The rules concerning the power to control beneficial enjoyment are the subject of IRC§ 674(a). The exceptions to these rules are in IRC § 674(b). 420