Charitable Remainder Annuity Trust – Data Inputs

[Kathleen Reynolds]

#4573

Enter the appropriate values into the data input fields for this calculation model.

• Transfer Date: Enter 1 to 12 to indicate the month for the transfer date and then enter the year of the transfer (mm/yyyy). If you enter a two-digit number such as 20, the program will automatically enter it as 2020. See Transition Period Notes.
• §7520 Rate: The program automatically displays three allowable 120% Midterm Applicable Federal Interest Rates (the current month and two preceding months) and places the rate that is most favorable in this input. You can override the program’s value by entering another rate. In which case, the phrase “Invalid §7520 Rate” appears. In some cases, 30% will appear as a rate. Thirty percent is the default value that appears when there is not a current AFR available for the chosen month. Download or manually update your AFR table. Check our web site at https://www.brentmark.com for an updated list of AFR Rates.
• Trust Type: Select Life, Term or Shorter.
• FMV of Trust: Enter the initial net fair market value of the assets placed in the trust when established.
• Growth of Trust: Enter the projected annual growth rate of the trust. This is only used for the Economic Schedule and does not affect the calculation of the deduction.
• Annual Payout: Enter the projected payout that will go to the beneficiary during the life of the trust. The program treats numbers 1-100 as a Percentage Payout and numbers greater than 100 as an Annual $ Payout. The program performs the 10% Test and the 50% Test on the dollar amount or percentage entered before allowing the amount to be used.
• Payment Period: Select the payment schedule that should be followed for each year (Annual, Semiannual, Quarterly, Monthly, and Weekly).
• Payment Timing: Select Begin or End to indicate when the payment should be made for the selected payment period. This helps to determine what payout frequency factor is used in the calculation.
• Term of Trust: Enter the duration of the trust, for a period not in excess of 20 years. Valid entries are 1-20. This data input field will only be available when Term is chosen as the Calculation Type.
• Number of Payments: The program calculates the number of payments based on the term and the payment period. If you would like to have a trust that makes additional payments (beyond the normal term), use this input field to indicate the total number of payments to be made. For example, if you have a trust making quarterly payments for 10 years, this data field would default to 40. If you wished to make payments for 10 years and 1 quarter, you would change the value to 41.
• Lives: Enter the Enter the number of lives (up to five) that will be used to determine the charitable deduction. This data input field is only available when Life is chosen as the Calculation Type.
• Ages: This data input field is only available when Life is chosen as the Calculation Type. Use a value from 0 to 109 to indicate the age of the person whose life is being used to measure the term of the trust. Enter the age of this person(s) using the birth date which is nearest to the transfer date.
• Income Tax Inputs: Click this button to enter the client’s income tax situation (used for the Tax Savings report).
• Cost Basis: Enter the amount of basis for the asset being placed in the trust.
• Charity Type: Choose 50%, 30%, or 20%. All qualified non-profit organizations will fit within one of these types (IRS Publication 78).
• Capital Gains Rate: Enter the income tax rate that applies to capital gains property.
• Optimize Annual Payout: Click this button to have the program calculate the highest payout rate that passes the 10% test for the AFR you select. This feature is useful in creating a new trust if you have not designed one before.
• Income Tax Inputs

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IMPORTANT NOTE: Mortality table 2010CM was included in version 2022.10 of the software. Table 2010CM reflects longer life expectancies than table 2000CM, and will generally result in life interests worth more, while remainder interests worth less. Once finalized, the new 2010CM table will go in effect on the first day of the first month after regulations have been finalized. If you have a prior version of the software, it is advised to update to the latest version before the transition period ends.

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