IRS Examples of FLIP-CRUT Triggering Events that Work

Oakland, CA – 800-775-7612 – Clearly, the whole FLIP-CRUT concept depends upon the Treasury Department’s meaning of a Triggering Event – at which time the Net Income CRT transforms to the Requirement CRT, with its yearly payment requirement.

So let’s analyze this Triggering Event concept by checking out some essentials:

1. The Triggering Event must be clearly specified in the FLIP-CRUT document. Treas. Reg. §1.664-3(a)(1)(i)(c)
2. The Triggering Event may be a certain DATE that is defined in the FLIP-CRUT document OR it MAY be upon the specific occurrence of an EVENT, however:.
If the Triggering Event is defined as an Event, then the occurrence of that Event can not be “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person. Treas. Reg. §1.664-3(a)(1)(i)(c)(1)

Examples of Triggering Events that WOULD NOT Work.

1. Upon the choice of the Donor (or Trustee) to sell the profile of highly appreciated openly traded securities;.
2. Whenever the Trustee feels like it;.
3. Upon the advice of the Donor’s financial consultant, Certified Public Accountant or other fiduciary that now is a perfect time to sell.

Each of these are examples of EVENTS that are “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual.

Examples of Triggering Events that WOULD Work:.

1. On the first day of June in the Third year after the FLIP-CRUT is established;
2. Upon the marriage, divorce, death, or birth of a child of the Donor;
3. Upon the sale of unmarketable properties that are not cash, money equivalents, or other possessions that can be readily offered or exchanged for money or cash equivalents.

# 1 works due to the fact that it is a set date that is specified in the FLIP-CRUT document.

# 2 works because these life occasions are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person.

# 3 works due to the fact that the sale of unmarketable possessions requires two parties – a Buyer and a Seller – both of whom must concur on a a great deal of determining factors. Therefore, both sides are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual.

Additional Treasury Department Guidance as to Appropriate Triggering Events.

In Treas. Reg. §1.664-3(a)(1)(i)(e) the Regulations provide seven (7) examples of exactly what an appropriate triggering event may look like. These “safe harbors” ought to not be thought about unique in nature.

They are:.

1. Upon the sale of the Donor’s previous individual house;.
2. The sale of securities for which there is no offered securities exemption permitting a public sale.
3. When the income recipient reaches a particular age;.
4. When the Donor gets married;.
5. When the Donor divorces;.
6. When the earnings recipient’s first kid is born; and.
7. When the earnings recipient’s father passes away.

While these are not the only scenarios that will certainly be authorized, each of them is a safe harbor, meaning they should be authorized if the fact-pattern matches the safe harbor.

It is vital to have the guidance of competent legal and tax counsel when thinking about setting up a FLIP-CRUT.

Connect with a Family Philanthropy Attorney at Ainer and Fraker 800-775-7612 right now to learn more about the incredible tax benefits of a FLIP-CRUT

A FLIP-CRUT is the Ideal Way to Sell Real Estate

Orinda, CA – 800-775-7612 – Previously, we explored the FLIP-CRUT technique in which a Charitable Remainder Trust begins as as a Net Income Charitable Remainder Trust, and at the time of a “Triggering Event”, switches over to a Standard Charitable Remainder Trust at a predetermined Unitrust or Annuity payout.

We also reviewed various Treasury Department definitions of Triggering Events, that are judged not subject to the control of the Trustee or Grantor or another person.

Among the most popular examples of Triggering Events is the sale of Unmarketable Assets, for instance, the sale of a Personal Residence, or any other real or commercial property, securities or various business holdings that are not publicly traded, and therefore are without any type of formal marketplace to value and sell.

In Treasury Regulations § 1.664-1(a)(7)(ii), the meaning of Unmarketable Assets includes:

Assets that are not cash, cash equivalents, or other assets that can be readily sold or exchanged for cash or cash equivalents. For example, unmarketable assets include real property, closely-held stock, and an unregistered security for which there is no available exemption permitting public sale.

Why this definition is essential when using a FLIP-CRUT to sell appreciated real estate.

A Charitable Remainder Trust is an excellent way to postpone the tax on sale if you own a piece of real estate that has appreciated in value, so that selling it outright would trigger considerable capital gains tax.

The IRS will unfortunately not allow the deduction due to the Step Transaction Doctrine if you contribute the real property to a Charitable Remainder Trust after a binding contract to sell already exists.

Putting real property in a Standard Charitable Remainder Trust may also not be feasible due to its fixed annual obligation to distribute the Unitrust or Annuity amount to the Grantor.

A Standard Charitable Remainder Trust will not work, if the real estate takes takes a while to sell (certainly more than a year).

This is why the Treasury Departments inclusion of Real Property as not being readily marketable is crucial. It allows you to donate the property immediately, take the appropriate deductions, and after that convert to a Standard Charitable Remainder Trust after there is enough liquidity (post-sale) to achieve the yearly distribution requirements.

The FLIP-CRUT is truly the preferred vehicle when selling appreciated assets that are not readily marketable, like real estate.

Get in touch with a Charitable Giving Lawyer at Ainer and Fraker 800-775-7612 today to find out how you can profit from the incredibly powerful tax benefits of a FLIP-CRUT.

Exploring the Planned Giving Benefits of a FLIP-CRUT

Saratoga, CA – 408-777-0776 – One of the most flexible techniques in the Planned Giving Attorney’s toolbox is the FLIP-CRUT.

It helps clients who wish to contribute a specific piece of real estate (or other unmarketable assets) to a Charitable Remainder Trust, but they aren’t certain exactly when the real property is going to be sold.

As a General Rule, this is going to be a big problem, since a Standard Charitable Remainder Trust is obligated to distribute its Unitrust or Annuity amount regardless of whether sufficient income exists.

The FLIP-CRUT solves this problem by permitting you to defer the Unitrust or Annuity distribution until after the investment property (or other unmarketable asset) is sold.

This is the way it works.

Usually, a Charitable Remainder Trust is required to disburse either a fixed percentage (unitrust) or fixed payment amount (annuity) to the Donor, no less frequently than on an annual basis.

But what happens the Trust doesn’t have assets that are capable of paying out the required amount yearly?

The answer is to start with a Net Income Charitable Remainder Trust, which has provisions allowing it to switch over (or FLIP) into a Standard Charitable Remainder Trust on a specified event in the future.

During the initial term, the CRT distributes the lesser of Net Income or the Unitrust amount. The amount paid out that year will be zero if there is no Net Income.

Upon the occurrence of a “Triggering Event”, the Trust then converts to a Standard Charitable Remainder Trust, and pays out the originally specified percentage.

For this client’s scenario, he contributed a $3.2 million piece of investment property, into an 8 %, 12 year FLIP-CRT.

During the initial period, prior to the sale of the real estate, the net income will be zero.

The CRT begins its annual 8 % unitrust distribution to the Grantor upon the occurrence of the Triggering Event – here in this situation the sale of the real estate.

A couple of critical rules to the use of a FLIP-CRUT:

(1) The “triggering event” may not be something that is “under the control” of the Donor. Interestingly enough, , the sale of real estate is not treated as to be “under the control” of the Grantor.

(2) The Donor may also be the Trustee of the CRT in some cases. An outside Special Independent Trustee is going to be required to manage the transactions if hard to value assets are donated – such as real estate, partnership interests … pretty much anything other than cash or publicly traded securities .

IN CONCLUSION: The FLIP-CRUT is an excellent instrument when you wish to donate Unmarketable Assets – or those that do not immediately produce income – to a Charitable Remainder Trust. You may still enjoy the substantial tax benefits of a Charitable Remainder Trust, while not being required to disperse Income until it is actually available.

Get in touch with a Family Philanthropy Attorney at Ainer and Fraker 408-777-0776 right now to find out how you can profit from the amazing tax benefits of a FLIP-CRUT.

Tax Advantages of Selling Real Estate in a FLIP-CRUT

San Jose, CA – (408) 777-0776 – In a prior post, we explored the FLIP-CRUT concept in which a Charitable Remainder Trust starts its life as a Net Income Charitable Remainder Trust, and at the time of a specific “Triggering Event”, converts to a Standard Charitable Remainder Trust with a defined Unitrust or Annuity distribution.

Additionally we discussed various Treasury Department definitions of Triggering Events, that are deemed not under the control of the Trustee or Grantor or any other person.

Among the most popular instances of Triggering Events is the sale of Unmarketable Assets, for instance, the sale of a Residential or Commercial property, closely-held securities or various business holdings that are not publicly traded, and therefore are without any sort of formal marketplace to value and sell.

Looking at Treasury Regulations § 1.664-1(a)(7)(ii), the definition of Unmarketable Assets includes:

Assets that are not cash, cash equivalents, or other assets that can be readily sold or exchanged for cash or cash equivalents. For example, unmarketable assets include real property, closely-held stock, and an unregistered security for which there is no available exemption permitting public sale.

Why this definition is essential when using a FLIP-CRUT to sell appreciated real estate.

A Charitable Remainder Trust is an exceptional way to postpone the tax at the time of sale if you own a piece of investment that has appreciated in value, and selling it outright would cause substantial capital gains.

The IRS will prohibit the deduction due to the Step Transaction Doctrine if you contribute the real property to a Charitable Remainder Trust once an irrevocable commitment to sell exists.

Contributing real property in a Standard Charitable Remainder Trust is also problematic due to its predetermined yearly obligation to pay the income to the Donor.

A Standard Charitable Remainder Trust does not work, if the investment property takes takes a good amount of time to sell (certainly more than a year).

This is why the inclusion by the Treasury Deparment of Real Property as not being readily marketable is essential. It allows you to grant the asset immediately, qualify for the appropriate deductions, and then make the conversion to a Standard Charitable Remainder Trust after there is enough liquidity (post-sale) to accomplish the annual distribution requirements.

The FLIP-CRUT is really the best vehicle when offering for sale appreciated assets that are not readily marketable, like real property.

To learn how you can take advantage of the amazing tax advantages of a FLIP-CRUT Contact a Charitable Giving Attorney at Ainer and Fraker 800-775-7612 right away.

What FLIP-CRUT Triggering Events will the IRS Permit?

Los Gatos, CA – 800-775-7612 – In a prior post, we went over the FLIP-CRUT idea in which a Charitable Remainder Trust starts its life as a Net Income Charitable Remainder Trust, and upon a “Triggering Event”, transforms to a Standard Charitable Remainder Trust at a fixed percentage distribution.

Certainly, the whole FLIP-CRUT idea depends upon the Treasury Department’s definition of a Triggering Event – at which time the Net Income CRT converts to the Standard CRT, with its yearly payment requirement.

So let’s analyze this Triggering Event concept by exploring some fundamentals:

1. The Triggering Event must be clearly defined in the FLIP-CRUT document Treas. Reg. §1.664-3(a)(1)(i)(c)
2. The Triggering Event may be a certain DATE that is specified in the FLIP-CRUT document OR it MAY be upon the certain incident of an OCCASION:.
3. If the Triggering Event is specified as an Event, then the event of that Event needs to not be “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or other individual. Treas. Reg. §1.664-3(a)(1)(i)(c)(1)

Examples of Triggering Events that WOULD NOT Work.

1. Upon the decision of the Donor (or Trustee) to offer the portfolio of extremely valued openly traded securities;.
2. Whenever the Trustee gets around to it;.
3. Upon the recommendations of the Donor’s financial advisor, CPA or other fiduciary that now is an ideal time to offer.

Each of these are examples of EVENTS that are “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person.

Examples of Triggering Events that WOULD Work:.

1. On the very first day of June in the 3rd year after the FLIP-CRUT is established;.
2. Upon the marriage, divorce, death, or birth of a child of the Donor;.
3. Upon the sale of unmarketable assets that are not cash, money equivalents, or other possessions that can be easily offered or exchanged for money or cash equivalents.

# 1 works because it is a set date that is specified in the FLIP-CRUT document.

# 2 works due to the fact that these life events are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person.

# 3 works due to the fact that the sale of unmarketable assets requires two parties – a Buyer and a Seller – both of whom should concur on a a great deal of figuring out factors. Both sides are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual.

Additional Treasury Department Guidance about Acceptable Triggering Events.

In Treas. Reg. §1.664-3(a)(1)(i)(e) the Regulations offer seven (7) examples of exactly what an acceptable triggering occasion may look like. These “safe harbors” should not be considered exclusive in nature.

They are:.

1. Upon the sale of the Donor’s former individual residence;.
2. The sale of securities for which there is no available securities exemption allowing a public sale.
3. When the income recipient reaches a specific age;.
4. When the Donor gets married;.
5. When the Donor divorces;.
6. When the income recipient’s very first child is born; and.
7. When the earnings recipient’s father dies.

While these are not the only circumstances that will be approved, each of them is a safe harbor, indicating they should be authorized if the fact-pattern matches the safe harbor.

When considering setting up a FLIP-CRUT, it is critical to have the advice of competent legal and tax counsel.

To learn more about the amazing tax benefits of a FLIP-CRUT Consult with a Planned Giving Attorney at Ainer and Fraker 408-777-0776 right away.

The FLIP-CRUT is One of the Most Flexible Tools in Planned Giving

Oakland, CA – 408-777-0776 – One of the most flexible techniques in Charitable Giving is the FLIP-CRUT.

The FLIP-CRUT helps clients solve the problem where they wish to donate a specific piece of real estate (or other non-liquid property) to a Charitable Remainder Trust, but they aren’t sure exactly when the real property will be sold.

As a General Rule, this is going to be a problem, since a Standard Charitable Remainder Trust is always required to distribute its Unitrust or Annuity amount, whether or not adequate income exists.

The FLIP-CRUT overcomes this problem by enabling you to defer the Unitrust or Annuity payout until after the real estate (or other non-liquid property) is sold.

Here’s how it works:

Normally, a Charitable Remainder Trust is required to pay out either a fixed percentage (unitrust) or fixed dollar amount (annuity) to the Income Recipient, no less than on an annual basis.

What happens if the Trust doesn’t have sufficient assets that are capable of generating the required amount annually?

The solution is to start with a Net Income Charitable Remainder Trust, which contains provisions permitting it to switch over (or FLIP) into a Standard Charitable Remainder Trust on a specified future event.

During the initial period, the CRT will distribute the lesser of Net Income or the Unitrust amount. If there is no Net Income, then the amount distributed during that period will be zero.

Upon the occurrence of a “Triggering Event”, the Trust then converts to a Standard CRT, and pays out the originally defined percentage.

In this particular client’s example, he donated a $3.2 million piece of investment property, into an 8 %, 12 year FLIP-CRT.

The net income is going to be zero during the initial period, prior to the sale of the real property.

However, upon the occurrence of the Triggering Event – in this instance the sale of the real property – the CRT begins its annual 8 % unitrust distribution to the Client.

Here are a few essential rules to using a FLIP-CRUT:

(1) The “triggering event” may not be something that is “under the control” of the Grantor. Interestingly enough, however, the sale of real estate is not considered being “under the control” of the Grantor.

(2) The Client can also serve as the Trustee of the CRT in certain cases. However, if hard to value assets
are donated – such as real property, partnership interests … essentially anything other than cash or publicly traded securities – than an outside Special Independent Trustee will be required to manage those transactions.

IN CONCLUSION: The FLIP-CRUT is actually a great instrument when you want to transfer Unmarketable Assets – or those that may not immediately produce income – to a CRT. You will still enjoy the substantial tax benefits of a CRT, while not being required to payout Income until it is actually available.

To learn how you can profit from the incredible tax benefits of a FLIP-CRUT Get in touch with a Planned Giving Attorney with Ainer and Fraker 408-777-0776 right away.

Why the Treasury Department favors the FLIP-CRUT

San Francisco, CA – (800) 775-7612 – In a prior post, we looked at the FLIP-CRUT concept in which a Charitable Remainder Trust begins as as a Net Income Charitable Remainder Trust, and after a “Triggering Event”, changes and becomes a Standard Charitable Remainder Trust with a fixed Unitrust or Annuity distribution.

We also looked at relevant Treasury Department definitions of Triggering Events, which are judged not to be subject to the control of the Trustee or another person.

Among the most common instances of Triggering Events is the sale of Unmarketable Assets, for example, the sale of a Personal Residence, or any other real or commercial property, securities or various business holdings that are not publicly traded, and do not have any sort of public marketplace to value and sell.

In Treasury Regulations § 1.664-1(a)(7)(ii), the interpretation of Unmarketable Assets includes:

Assets that are not cash, cash equivalents, or other assets that can be readily sold or exchanged for cash or cash equivalents. Unmarketable assets include real property, closely-held stock, and an unregistered security for which there is no available exemption permitting public sale.

Why this definition is essential when using a FLIP-CRUT to sell appreciated real estate.

A Charitable Remainder Trust is an excellent way to postpone the tax on sale if you possess a piece of real estate that has appreciated in value, so that selling it outright would result in significant capital gains.

The IRS will unfortunately prohibit the deduction based on the Step Transaction Doctrine if you donate the real property to a Charitable Remainder Trust once an irrevocable commitment to sell already exists.

On the other hand, placing real property in a Standard Charitable Remainder Trust – which has a fixed yearly commitment to pay the income to the Grantor – may also not be feasible.

A Standard Charitable Remainder Trust will not get the job done, if the real property takes takes a good amount of time to sell (surely more than a year).

This is why the Treasury Departments inclusion of Real Property as not readily marketable is critical. It allows you to donate the property immediately, take the appropriate deductions, and after that convert to a Standard Charitable Remainder Trust after there is sufficient liquidity (post-sale) to fulfill the yearly distribution requirements.

The FLIP-CRUT is really the best vehicle when offering for sale appreciated assets that are not readily marketable, such as real estate.

Connect with a Family Philanthropy Attorney at Ainer and Fraker 800-775-7612 right now to find out how you can take advantage of the incredible tax benefits of a FLIP-CRUT.

FLIP-CRUT Safe Harbors According to Treasury Regulations

San Francisco, CA – 408-777-0776 – In a prior post, we talked about the FLIP-CRUT idea in which a Charitable Remainder Trust starts its life as an Earnings Charitable Remainder Trust, and upon a “Triggering Event”, transforms to a Standard Charitable Remainder Trust at a set percentage distribution.

Certainly, the whole FLIP-CRUT idea hinges on the Treasury Department’s definition of a Triggering Event – at which time the Net Income CRT transforms to the Standard CRT, with its annual payment requirement.

Let’s examine this Activating Event concept by exploring some fundamentals:

1. The Triggering Event needs to be clearly defined in the FLIP-CRUT document. Treas. Reg. §1.664-3(a)(1)(i)(c)
2. The Triggering Event may be a certain DATE that is specified in the FLIP-CRUT document OR it MAY be upon the specific incident of an EVENT, however:.
If the Triggering Event is defined as an Event, then the occurrence of that Event can not be “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual. Treas. Reg. §1.664-3(a)(1)(i)(c)(1)

Examples of Triggering Events that WOULD NOT Work.

1. Upon the choice of the Donor (or Trustee) to sell the profile of extremely valued openly traded securities;.
2. Whenever the Trustee feels like it;.
3. Upon the advice of the Donor’s financial consultant, Certified Public Accountant or other fiduciary that now is an ideal time to sell.

Each of these are examples of EVENTS that are “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or other individual.

Examples of Triggering Events that WOULD Work:.

1. On the first day of June in the 3rd year after the FLIP-CRUT is developed;.
2. Upon the marriage, divorce, death, or birth of a child of the Donor;.
3. Upon the sale of unmarketable assets that are not cash, cash equivalents, or other possessions that can be readily offered or exchanged for money or cash equivalents.

Because it is a fixed date that is specified in the FLIP-CRUT document, # 1 works.

# 2 works due to the fact that these life occasions are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual.

# 3 works since the sale of unmarketable possessions needs two parties – a Purchaser and a Seller – both of whom have to agree on a a great deal of identifying factors. Both sides are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person.

Additional Treasury Department Guidance about Acceptable Triggering Events.

In Treas. Reg. §1.664-3(a)(1)(i)(e) the Regulations provide seven (7) examples of what an acceptable triggering event might involve. These “safe harbors” should not be considered unique in nature.

They are:.

1. Upon the sale of the Donor’s former individual residence;.
2. The sale of securities for which there is no available securities exemption allowing a public sale.
3. When the earnings recipient reaches a particular age;.
4. When the Donor gets married;.
5. When the Donor divorces;.
6. When the earnings recipient’s first kid is born; and.
7. When the income recipient’s dad dies.

While these are not the only circumstances that will be authorized, each of them is a safe harbor, indicating they should be approved if the fact-pattern matches the safe harbor.

It is important to have the suggestions of qualified legal and tax counsel when considering establishing a FLIP-CRUT.

Call a Charitable Giving Attorney with Ainer and Fraker 800-775-7612 right away to find out how you can profit from the powerful tax advantages of a FLIP-CRUT.

What are the Essential Elements of a FLIP-CRUT?

San Francisco, CA – Fairly recently, I was working with a client to develop a Charitable Remainder Trust in to which he would be able to contribute his $3.2 million real property.

In our discussion, my Client communicated his desire to not sell the investment property inside the Charitable Remainder Trust until the second or third year year after donation.

So, I asked him: “Have you ever thought about a FLIP-CRUT?”.

To which he replied: “What is a FLIP-CRUT?”.

To which I said: “It’s an unique variety of Charitable Remainder Trust, which allows you to defer the annual income distribution until after your real estate sells.”.

This is the way it works.

Usually, a Charitable Remainder Trust is required to pay out either a fixed percent (unitrust) or fixed pecuniary amount (annuity) to the Income Recipient, no less frequently than annually.

What happens if the Trust doesn’t have sufficient assets that are capable of generating the required amount each year?

The solution is to start with a Net Income Charitable Remainder Trust, which contains language permitting it to switch over (or FLIP) into a Standard Charitable Remainder Trust on a specified event in the future.

During the initial period, the CRT pays out the lesser of Net Income or the Unitrust amount. If there is no Net Income, then the amount paid out during that period will be zero.

Upon the occurrence of a “Triggering Event”, the Trust then converts to a Standard CRT, and pays out the originally defined percentage.

In this particular client’s example, he contributed a $3.2 million piece of investment property, into an 8 %, 12 year FLIP-CRT.

During the initial period, before the sale of the real property, the net income would be zero.

The CRT begins its annual 8 % unitrust payout to the Client upon the occurrence of the Triggering Event – in this instance the selling of the real property.

There are a couple of critical rules to the use of a FLIP-CRUT:

(1) The “triggering event” may not be something that is “under the control” of the Donor. Oddly enough, , the sale of real property is not deemed being “under the control” of the Donor.

(2) The Grantor may also be the Trustee of the Charitable Remainder Trust (CRT) in some cases. An outside Special Independent Trustee is required to manage the transactions if hard to value assets are donated – such as real property, partnership interests … pretty much anything apart from cash or publicly traded securities .

CONCLUSION: The FLIP-CRUT is a great instrument when you wish to donate
Unmarketable Assets – or those that do not immediately produce income – to a Charitable Remainder Trust. You will still enjoy the substantial tax benefits of a Charitable Remainder Trust, while not being forced to distribute Income until it is available.

Contact a Charitable Giving Lawyer with Ainer and Fraker 800-775-7612 right now to learn how you can profit from the powerful tax benefits of a FLIP-CRUT.

Using a FLIP-CRUT to Sell Real Estate

Oakland, CA – 800-775-7612 – In a prior post, we explained the FLIP-CRUT technique in which a Charitable Remainder Trust starts its life as a Net Income Charitable Remainder Trust, and upon a specific “Triggering Event”, changes to a Standard Charitable Remainder Trust at a defined percentage payout.

Additionally we looked at relevant Treasury Department definitions of Triggering Events, that are judged not to be subject to the control of the Trustee or Grantor or any other person.

Among the most popular examples of Triggering Events is the sale of Unmarketable Assets, for instance, the sale of a Personal Residence, or any other real or commercial property, closely-held securities or various business holdings that are not publicly traded, and therefore are without a formal marketplace to value and sell.

In Treasury Regulations § 1.664-1(a)(7)(ii), the meaning of Unmarketable Assets includes:

Assets that are not cash, cash equivalents, or other assets that can be readily sold or exchanged for cash or cash equivalents. Unmarketable assets include real property, closely-held stock, and an unregistered security for which there is no available exemption permitting public sale.

Why this definition is important when using a FLIP-CRUT to sell appreciated real estate.

If you have a piece of investment that is highly appreciated in value, and selling it outright would result in substantial capital gains tax, a Charitable Remainder Trust is an exceptional way to postpone the tax at the time of sale.

If you donate the real estate to a Charitable Remainder Trust after a binding obligation to sell already exists, then unfortunately the IRS will not allow the deduction based on the Step Transaction Doctrine.

Contributing real property in a Standard Charitable Remainder Trust may also not be feasible due to its fixed yearly commitment to distribute the Unitrust or Annuity amount to the Grantor.

A Standard Charitable Remainder Trust does not get the job done, if the real property takes takes a good amount of time to sell (surely more than a year).

This is why the Treasury Departments inclusion of Real Property as not being readily marketable is critical. It allows you to grant the asset immediately, get back the appropriate deductions, and after that convert to a Standard Charitable Remainder Trust after there is sufficient liquidity (post-sale) to accomplish the annual payout requirements.

Therefore, the FLIP-CRUT is truly the best vehicle when selling appreciated assets that are not readily marketable, like real estate.

Connect with a Planned Giving Attorney at Ainer and Fraker 800-775-7612 today to find out how you can profit from the incredibly powerful tax benefits of a FLIP-CRUT.