non spouse 403b to charity
have client who inherited a 403b as a non-spouse. The contract is worth 320k. She will take the 5yr deferral…but:
a. if she takes 150k and does a CRUT this year, will she have to pay taxes on the 150k (she cant rollover to the crut…she must take a distribution and then make a check out to the crut or can she have a transfer done from the 403)?
or
b. she would pay no taxes but only on the income that comes in from the CRUT?
Thank you,
Doug
Permalink Submitted by mk foss on Tue, 2014-06-24 16:41
You are correct, she will pay tax on the 150K. The deduction for the CRUT will depend on her age (or the term if she chooses) but it will not be 150K. She will then pay taxes on the income generated from the CRUT on an ongoing basis. Often the CRUT is funded with appreciated assets and a portion of the gain that arises when the CRUT sells that asset will come back to the donor as part of the income streatm. In this case with no appreciation, any distributions greater than the current year income will be a tax-free distribution of corpus.