Contents

§ 12.2 CHARITABLE REMAINDER ANNUITY TRUST RULESThe 5 percent requirement must be met until the termination of all of the annuitypayments. For example, the following provisions comport with this requirement:• An amount equal to at least 5 percent of the initial net fair market value ofthe property placed in trust to A and B for their joint lives and then to thesurvivor of them for his or her life• An amount equal to at least 5 percent of the initial net fair market value ofthe property placed in trust to A for life or for a term of years not longerthan 20 years, whichever is longer (or shorter)• An amount equal to at least 5 percent of the initial net fair market value ofthe property placed in trust to A for a term of years not longer than 20years and then to B for life (as long as B was living at the date of creationof the trust)• An amount to A for her life and concurrently an amount to B for her life(the amount to each recipient to terminate at her death) if the amountgiven to each individual is not less than 5 percent of the initial net fairmarket value of the property placed in trust• An amount to A for his life and concurrently an equal amount to B for hislife, and at the death of the first to die, the trust to distribute one-half ofthe then value of its assets to a charitable organization, if the total of theamounts given to A and B is not less than 5 percent of the initial net fairmarket value of the property placed in trust. 99(g) Permissible Remainder Interest BeneficiariesAt the end of the annuity payment period, the entire corpus of the trust must beirrevocably transferred, in whole or in part, to or for the use of one or more charitableorganizations or retained, in whole or in part, for a charitable use 100 or, tothe extent the remainder interest is in qualified employer securities, all or part ofthe securities may be transferred to an employee stock ownership plan 101 in aqualified gratuitous transfer. 102 The trustee may have the power, exercisable duringthe donor’s life, to add and/or substitute additional charitable organizationsas remainder interest beneficiaries. 103Charitable Organizations. If all of the trust corpus is to be retained for charitableuse, the tax year of the trust must terminate at the end of the annuity paymentperiod and the trust must cease to be treated as a CRT for all purposes. Ifall or any portion of the trust corpus is to be transferred to or for the use of a99 Reg. § 1.664-2(a)(5)(ii).100 IRC § 664(d)(i)(c); Reg. § 1.664-2(a)(6)(i).101 A plan of this nature (authorized by IRC § 4975(e)(7)) is a qualified stock bonus plan or a combination stockbonus and money purchase pension plan, under which employer securities are held for the benefit of employees.The securities, which are held by one or more tax-exempt trusts under the plan, may be acquired throughdirect employer contributions or with the proceeds of a loan to the trust or trusts.102 A qualified gratuitous transfer of employer securities to an employee stock ownership plan gives rise to anestate tax charitable contribution deduction based on the present value of the remainder interest. IRC §2055(a)(5).103 Rev. Rul. 76-371, 1976-2 C.B. 305. 423