A trust qualifies as a charitable remainder annuity trust if the following conditions are met:
- The trust pays a specified sum to at least one non-charitable beneficiary who is living when the trust is created. This sum must be paid annually, semiannually, quarterly, monthly, or weekly, regardless of trust income, appreciation or depreciation of the value of the trust’s assets.
- The sum paid annually must be 5% or more of the initial net fair market value of the property placed in the trust.
- The payout rate may not exceed 50% of the initial value of the trust assets for all transfers to trust after June 18, 1997 [Code §664(d)(1)(A)].
- The value of the charitable remainder must be at least 10% of the net fair market value of the assets transferred to the trust on the date of the gift, effective for trusts funded after July 28, 1997.
- No sum is paid to anyone other than the specified non-charitable beneficiary (who must be alive when the trust is created) and a qualified charitable organization.
- When the specified term ends, the remainder interest is transferred to a qualified charity or is retained by the trust for the use of the qualified charity.
