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    • Keith
      Keymaster
      Post count: 18

      This calculation computes the portion of a charitable remainder annuity trust (CRAT) or charitable remainder unitrust (CRUT) that may be includible in the grantor’s gross estate if the grantor has retained the annuity or unitrust interest, or the portion of a grantor retained annuity trust (GRAT) or grantor retained unitrust (GRUT) that may be includible in the grantor’s estate if death occurs before the trust term ends. The inclusion is calculated in accordance with the regulations under IRC §2036 that were published in T.D. 9414, 73 F.R. 40173 (7/14/2008) and became effective when published.

      Under the regulations, the IRS will not attempt to apply IRC §2039 to require inclusion of any part of a CRAT, CRUT, GRAT or GRUT.In the case of a CRAT or GRAT, the inclusion is based on the amount of principal needed to produce an income equal to the annuity amount, which is calculated by dividing the annuity by the §7520 rate. In the case of a CRUT or GRUT, the includible amount is determined in three steps as follows (i.e., the computation performed by the software):

      • Find the “adjusted payout rate” for the unitrust amount.
      • Find equivalent income interest rate, which is the adjusted payout rate from step one divided by (1-adjusted payout rate).
      • Find includible portion which is the step 2 equivalent income interest rate divided by the §7520 rate.

      To “bullet-proof” the tax savings, life insurance in the amount of the expected estate tax savings can be purchased by an adult beneficiary or by the trustee of an irrevocable trust.

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