roll IRA to CRT
If I roll an IRA to a CRT would $1 mill. go to CRT without taking out income? Then would I get a tax deduction of $ 1 mill.
This would be an annuity CRT and would happen the same time as a $1 mill IRA Rollover to a Roth
If I roll an IRA to a CRT would $1 mill. go to CRT without taking out income? Then would I get a tax deduction of $ 1 mill.
This would be an annuity CRT and would happen the same time as a $1 mill IRA Rollover to a Roth
Permalink Submitted by Alan Spross on Wed, 2010-11-03 23:26
A trust cannot own an IRA. A contribution to a CRT would have to follow a taxable IRA distribution, and then the deduction would offset some of the taxes on the distribution and/or taxes on the Roth conversion.
Permalink Submitted by mk foss on Thu, 2010-11-04 00:56
An IRA cannot be used to fund a CRT during the owner’s lifetime. If the CRT is set up at death, the individual’s estate can get a charitable deduction for the income portion of the CRT. For a $1 million IRA it would never be the entire value. The actual deduction depends upon the age of the income beneficiary and the applicable federal interest rate when the trust is created.
If a CRT was created/funded with a $1 million dollar IRA at the death of the owner and the annuity rate was 5% – the CRT would need to pay the beneficiary $50,000 per year. The trustee would normally cash in the IRA to do so and invest the proceeds in something that is ecpected to yield about 5% per year. The distributions to the beneficiary are likely to be 100% ordinary income because they’re paid from an ordinary income asset. The CRT could be a unitrust where the value is redetrmined each year and the percentage applied.
But as Alan says, it can’t be done in your lifetime.
Permalink Submitted by Bruce Steiner on Thu, 2010-11-04 02:36
Leaving an IRA to a charitable remainder trust produces a result similar to a stretchout (a stream of payments to one or more individuals), though with much less flexibility.
Before the proposed regulations were overhauled in 2001, IRA owners had to elect term certain or recalculation upon reaching their required beginning date. Leaving an IRA to a charitable remainder trust was a way to get around a recalculation election where the IRA owner did not have a spouse. But since 2001 this has not been an issue.
It will rarely make sense to name a charitable remainder trust as the beneficiary of an IRA. I don’t think I’ve had any such cases since the 2001 change in the proposed regulations.