Instructions For Form 5227 - 2016 (Page 2 of 20) in pdf

have been allowed a deduction under one of the sections

(vi). Donors to the fund receive a lifetime income interest,

listed in section 4947(a)(2). At the end of the lead period,

based upon the rate of return earned by the trust (or such

annual payments to the charitable organization cease, and

other rate as may be prescribed for a trust in existence for

the remaining corpus becomes payable, outright or in trust, to

less than three years). Upon the death of the donor and the

a noncharitable (private) beneficiary.

termination of his or her income interest, the charitable

organization becomes entitled to the portion of the trust

Charitable remainder annuity trust (CRAT). This is a

corpus attributable to the donor’s contribution, free of trust.

split-interest trust described in section 664(d)(1). It pays a

fixed dollar (annuity) amount, at least annually, to one or

Recipient. A recipient is a beneficiary who receives the

more recipients, at least one of which isn't a charitable

possession or beneficial enjoyment of the unitrust or annuity

organization. The annuity amount must be at least 5%, but

amount.

cannot exceed 50%, of the initial net fair market value (FMV)

Foundation manager. A foundation manager is an officer,

of all property contributed to corpus, subject to the further

director, or trustee (or an individual who has powers or

requirement that the remainder interest in the trust

responsibilities similar to those of officers, directors, or

(measured at the time property is transferred to the trust)

trustees). In the case of any act or failure to act, the term

must have a value of at least 10% of the FMV of the initial

foundation manager may also include an employee of the

trust corpus. Payments to the recipient continue for a period

trust who has the authority to act.

of years. The period, if stated as a specific number, cannot

Disqualified person. A disqualified person is:

exceed 20 years. The period can also be determined by the

lifespan of one or more recipients. Whether the period is a

1. A substantial contributor;

fixed number of years, or is measured by an individual’s

2. A foundation manager;

lifespan, the value of the remainder interest must be at least

3. A person who owns more than 20% of a corporation,

10% of the FMV of the property transferred to the trust (as

partnership, trust, or unincorporated enterprise, which is itself

explained above). Upon termination of the recipient’s

a substantial contributor;

entitlement to the annuity amount, the remainder interest

passes to a charitable organization described in section

4. A member of the family of an individual in the first three

170(c), or qualified employer securities are transferred to an

categories; or

employee stock ownership plan.

5. A corporation, partnership, trust, or estate in which

persons described in (1), (2), (3), or (4) above own a total

Charitable remainder unitrust (CRUT). This is a

beneficial interest of more than 35%.

split-interest trust described in section 664(d)(2). It is similar

in many respects to a CRAT except that the amount payable

6. For purposes of section 4943 (excess business

to the recipient annually (the unitrust amount) is a fixed

holdings), a disqualified person also includes:

percentage (not less than 5% but not more than 50%) of the

a. A private foundation which is effectively controlled

net FMV of the trust’s assets, subject further to the

(directly or indirectly) by the same persons who control

requirement described above that the remainder interest

the trust in question, or

must have a value of at least 10% of the value of the initial

b. A private foundation substantially all of the

trust corpus, determined at the time property is transferred to

contributions to which were made (directly or indirectly)

the trust. Because the unitrust amount is calculated annually

by the same person or persons described in (1), (2), or

based upon the FMV of trust corpus, and isn't a fixed amount

(3) above, or members of their families, within the

determined upon the creation of the trust, the trustee must

meaning of section 4946(d), who made (directly or

determine the FMV of the assets of the trust annually. Upon

indirectly) substantially all of the contributions to the trust

termination of the recipient’s entitlement to payments of the

in question.

unitrust amount, the remainder interest is transferred to a

7. For purposes of section 4941 (self-dealing), a

charitable organization described in section 170(c), or

disqualified person also includes certain government

qualified employer securities are transferred to an employee

officials. (See section 4946(c) and the related regulations.)

stock ownership plan. The trust agreement for a CRUT may

allow the trustee to distribute less than the full unitrust

Photographs of Missing Children

amount in years when the trust income (as defined under

The Internal Revenue Service is a proud partner with the

section 643(b)) is less than the unitrust amount. A

National Center for Missing and Exploited Children.

Net-Income Makeup Charitable Remainder Unitrust

Photographs of missing children selected by the Center may

(NIMCRUT) is a charitable remainder unitrust that allows

appear in instructions on pages that would otherwise be

payment of the unitrust amount to be deferred in years when

blank. You can help bring these children home by looking at

the unitrust amount exceeds trust income, with the deferred

the photographs and calling 1-800-THE-LOST

distributions being made up in a later year when the trust has

(1-800-843-5678) if you recognize a child.

sufficient income. A Net Income Charitable Remainder

Unitrust (NICRUT) is a charitable remainder unitrust that

Phone Help

allows for deferral of the unitrust payment (as described

above), but does not provide for deferred distributions to be

If you have questions and/or need help completing this form,

made up in future years.

please call 1-877-829-5500. This toll-free telephone service

is available Monday through Friday.

Note. The terms “section 664 trust” and “CRT” are general

Additional Information

references to charitable remainder trusts. These terms

include CRATs and CRUTs.

For additional information on private foundations and

Pooled income fund. This is a split-interest trust described

foundation managers, visit

in section 642(c)(5), which is created and administered by a

charitable organization described in section 170(b)(1)(A)(i) –

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Instructions for Form 5227

Instructions For Form 5227 - 2016 Page 2

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