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§ 12.2 CHARITABLE REMAINDER ANNUITY TRUST RULESIn contrast, this rule is not violated when the grantor has reserved the right toremove the trustee for any reason and substitute any other person (including thegrantor) as trustee. 87In one instance, the IRS reviewed a trust that was intended to qualify as aCRAT. The trust had an independent trustee. The governing instrument of thetrust provided that the trustee is to pay the specified distribution to or amongthe named individuals—B, C, and D—in such amounts and proportions as thetrustee, in its sole discretion, shall from time to time determine until the death ofthe survivor of B, C, or D. B is a child of A. C is unrelated to, but was a formeremployee of, A. D is unrelated to and was never employed by A. The IRS heldthat because the trustee was independent, the payments could be allocated asdescribed without precluding the trust from qualifying as a CRT, inasmuch asthe power to make the allocation would not cause any person to be treated as theowner of the trust or any portion of it. 88A pet animal is not a person for this purpose. Thus, an otherwise qualifyingCRAT that provides for care for a pet animal during its lifetime does not qualifyas a CRAT. 89(e) Other PaymentsNo amount other than the annuity amount or qualified gratuitous transfers 90 maybe paid to or for the use of any person other than a charitable organization. 91 Anamount is not paid to or for the use of any person other than a charitable organizationif the amount is transferred for full and adequate consideration. The trustmay not be subject to a power to invade, alter, amend, or revoke for the beneficialuse of a person other than a charitable organization. 92 The grantor may, however,retain the power exercisable only by will to revoke or terminate the interestof any recipient other than a charitable organization. 93Also, the grantor may reserve the power to designate a substitute charitableremainder beneficiary without disqualifying an otherwise acceptable CRAT. 94The governing instrument of a CRAT may provide that any amount otherthan the annuity amount shall be paid (or may be paid in the discretion of thetrustee) to a charitable organization, provided that, in the case of distributionsin kind, the adjusted basis of the property distributed is fairly representative ofthe adjusted basis of the property available for payment on the date of payment.87 Rev. Rul. 77-285, 1977-2 C.B. 213.88 Rev. Rul. 77-73, 1977-1 C.B. 175.89 Rev. Rul. 78-105, 1978-1 C.B. 295.90 See § 12.2(g)(ii).91 IRC § 664(d)(1)(B).92 In one instance, a trust was disqualified as a CRAT because an income interest beneficiary was entitled to distributions,with the trust obligated to pay (by means of invasion of the trust’s corpus) at least some of the resultantfederal estate and state death taxes. Atkinson Estate v. Commissioner, 115 T.C. 26 (2000). See also Rev.Rul. 82-128, 1982-2 C.B. 71 (providing that a trust does not qualify as a CRT “if it is possible that federal estateand state death taxes may be payable from the trust assets”).93 Reg. § 1.664-2(a)(4). This retention, when done in connection with an individual’s spouse, causes an incompletegift to the spouse for gift tax purposes (see § 8.2) but does not defeat the charitable contribution deductionfor the remainder interest. Rev. Rul. 79-243, 1979-2 C.B. 343.94 Rev. Rul. 76-8, 1976-1 C.B. 179. 421