Forums Support Library CFP – Charitable Financial Planner Charitable Remainder Annuity Trust (CRAT) Summary Report

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• Kathleen Reynolds
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When the annuity is annualized, it must not be less than 5% of the initial fair market value of the trust; therefore, the Charitable Financial Planner does not allow the Percentage Payout input field to drop below 5%.

If the annuity is payable other than at the end of the year, the program uses special adjustment factors to do the calculation. The fair market value of the remainder interest of a charitable remainder annuity trust is the net fair market value of the property placed in trust less the present value of the annuity.

The program multiplies the annual dollar payout and the annuity factor to find the annuity. The program automatically selects the factor depending on the Calculation Type used. To find the appropriate factor see the IRS Publication 1457, Actuarial Values Alpha Volume.

The summary report shows the direct results from the values that are entered into the input fields.

• Amount of Annuity: A dollar amount of the percentage payout. The annuity must pass the “5% Probability Test.” The test ensures that the trust does not exceed a 5% chance of diminishing to an insufficient amount, leaving no remainder distribution to the charity. If the annuity is payable other than at the end of the year, the program uses special adjustments in the calculation.
• (Term or One-Five Lives) Annuity Factor: The annual dollar payout is multiplied times the annuity factor. The Calculation Type used governs the annuity factor that is used. You can find the annuity factor in the IRS Publication 1457, Actuarial Values Alpha Volume. If the annuity is payable at the end of the payment period, a period adjustment factor (Treasury Reg. §20.2031-7(b)(3)(i); the period adjustment factor is found in §20.2031-7(b)(2) is used for transfers prior to May 1989. For transfer dates after April 1989, an adjustment factor from Table K for the appropriate interest rate is used. If the annuity is payable at the beginning of the payment period, a period adjustment factor is used for transfers prior to May 1989, or Table K is used with the product added to the first payment for transfers after April, 1989.
• Payout Frequency Factor: Adjusts the Present Value of the annuity. This factor comes from Table K.
• Present Value of Annuity: The Amount of the Annuity times the Annuity Factors. Gives the value of the money the beneficiary(ies) receive.
• Charitable Remainder: The Fair Market Value of the Trust minus the Present Value of Annuity. In other words, the fair market value of the remainder interest of a charitable remainder annuity trust is the net fair market value of the property placed in the trust minus the present value of the annuity.
• Charitable Deduction for Remainder Interest: The dollar amount that is not subject to taxation (income tax).
• Donor’s Deduction as Percentage of Amount Transferred: The percentage amount that is not subject to taxation (income tax).