Estate Planning Please provide little explanation with the answers. ............

Question

Estate Planning

Please provide little explanation with the answers.

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1- Which of the following factors is the critical or deciding characteristic that indicates that a trust should be classified as a charitable remainder unitrust, rather than a charitable remainder annuity trust?

A- The amount of income specified for the noncharitable income beneficiary must be paid annually out of income and/or principal.

B- A fixed percentage of the fair market value of the principal, as revalued annually, must be payable to the noncharitable beneficiary.

C- The amount payable to the noncharitable beneficiary must be at least 5% of the fair market value of the property initially transferred to the trust.

D- The trust must be irrevocable and not subject to a power by the donor, the trustee, or the beneficiary to alter or amend the trust.

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2- Which of the following statements concerning the advantages of the charitable remainder annuity trust over the charitable remainder unitrust is (are) correct?

I. The annuity trust is easier to administer.

II. The annuity trust may provide a larger current income tax deduction.

III. The annuity trust may provide a greater value for the remainder interest.

          A.      I only

          B.      I and II only

          C.     II and III only

          D.     I, II and III

Explanation / Answer

1) Major characteristics of charitable remainder unitrust,

A fixed percentage of the fair market value of the principal, as revalued annually, must be payable to the non-charitable beneficiary.

The percentage payable to the non-charitable beneficiary must not be less than 5% or more than 50% of the annual value.

So the option is B

2) Charitable remainder annuity trust, may provide a larger current income tax deduction and provide a greater value for the remainder interest. But charitable remainder unitrust is easier to administer.

So Option C.

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