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.
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