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Kathleen ReynoldsKeymasterNovember 3, 2022 at 11:19 pmPost count: 428
Please see below image for details on section inputs.
A few assumptions are made:
- The IRA accounts are the only ones that will be used to fund a CRT.
- For simplicity, the program will consider IRA balances at time of second death (for second to die IRA balances), as well as the single analysis death year. So, for example, a married case, where the first to die’s beneficiary is not the spouse will not currently be considered in the CRT.
- The ages used to calculate the valuation of the CRT are taken from the beneficiary(ies) for the second to die (or first if single case). The ages at the time of the death are used for the valuation.
- The Roth calculations will not be impacted, if there was an existing Roth balance (this strategy does not do conversions)
- The payments to beneficiaries are treated as normal income, and added to the beneficiary(ies) AGI for the year.
- The payments to beneficiaries will be split based on the inherited percentages.
- Trust Type Select between a Life and a Term type of trust. Generally speaking, if you create a CRT and it does not pass the 10% test, its likely that it fails if the ages used are relatively young, with a corresponding 7520 Rate. Try using a Term trust type.
- Term: If you have selected a Term Trust Type, enter the number of years for the CRT.
- Optimize Payout: You can elect to manually enter a payout rate, or have the application calculate the optimal payout rate that passes the required tests (10%, additional ones for CRAT). For optimal results, its suggested to have this input set to ‘Yes’.
- Payout Rate: If you are optimizing, the optimal payout will be displayed. If you want to enter a manual number, the input will show if you are not optimizing. Keep in mind, there are requirements that the payout rate can NOT be below 5% nor above 50%. If the rate entered is below 5% or the optimal rate returns a rate of 5%, it will default to the lowest value possible (5%).
- §7520 Rate: Enter the rate that corresponds to the month/YYYY of death. This rate will round to the nearest 0.20 value, by definition rules.
- Months: If you have selected a CRUT, the Months input will appear. This allows you to enter the number of months that precede the first payment.
- CRUT Type: If you have selected a CRUT, you can select between economic shedules, such as Normal, NICRUT, NIMCRUT, an FLIPCRUT.
- Trust Growth: Enter the growth rate of the trust to be used. If you have selected a NIMCRUT, NICRUT, or FLIPCRUT, this will also serve as the initial growth rate prior to the flip year.
- Trust Income: For CRUTs, enter the income rate of the trust to be used. If you have selected a NIMCRUT, NICRUT, or FLIPCRUT, this will also serve as the initial income rate prior to the flip year.
- Flip Year: For NIMCRUT, NICRUT, and FLIPCRUT, enter the year for which a shift in the economic schedule should occur (change of income/growth, etc).
- Growth (Post-Flip): For NIMCRUT, NICRUT, and FLIPCRUT, enter the growth rate to be used after the flip year.
- Income (Post-Flip): For NIMCRUT, NICRUT, and FLIPCRUT, enter the income rate to be used after the flip year.
- Does Not Pass 10% Test Warning message that appears on screen. If you are using a CRUT, this message will appear if the charitable deduction is less than 10%. If you are doing a CRAT, the message will appear for a 10% test, but also if the 77434 probablity test fails. Low 7520 rates will trigger this message, as well as multiple ages used where the ages are relatively young.
For more information on CRUTs, click here.
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