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CRUT Payout

  • 1.  CRUT Payout

    Posted 07-23-2021 08:06 AM
    Hello all,

    My organization just received the final payout from a CRUT that was closed after the donor passed away. I'm looking for some advice on how to receipt this, ie. what numbers do we need to share (ie. total payment amount vs. net from what was already booked, etc.), is there any CRUT-specific tax language that must be included, are there different standards if the CRUT was held by my org vs. held by the donor and we're simply the beneficiary. Any advice would be much appreciated.  

    I tried searching the document archives for a sample or some general CRUT background material but couldn't find quite what I was looking for, so if this is already posted elsewhere a link would also be appreciated!

    Thank you,

    Meghan Hickey

    ------------------------------
    Meghan Hickey
    Gift Services Manager
    Joslin Diabetes Center
    meghan.hickey@joslin.harvard.edu
    ------------------------------


  • 2.  RE: CRUT Payout

    Posted 07-23-2021 08:24 AM
    If you were the designated irrevocable beneficiary, you do not issue a receipt.  The gift was the original CRUT establishment.  The donor received a receipt per IRS rules then.  You should have recorded a gift then.  The payout is not a gift, so's not get a receipt, and is not counted in fundraising totals.

    You will want to acknowledge receiving the payout in a letter of some sort.  But nothing more.

    If, however, you were NOT the original irrevocable beneficiary, you would not have recorded a gift.  However, the donor would have already claimed a deduction.  In this case you CAN count the proceeds.  But still do not issue a tax receipt.  Just a letter of acknowledgment.

    John

    John H. Taylor 
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard





  • 3.  RE: CRUT Payout

    Posted 07-23-2021 02:28 PM
    Meghan, now that I am back in my office I have an opportunity to find the relevant section of the CASE Standards addressing this topic.  Your colleagues in Harvard's Office of Development and Alumni Relations should have a copy if you do not.

    The important pages are 279 and 280.  Here are a couple of snippets:

    "Nonetheless, to count the assets in fundraising totals for reporting to the VSE Survey, the charitable remainder beneficiary designation must be irrevocable and verified."

    And also,

    "Retention of Right to Change Beneficiaries

    "When establishing a qualified irrevocable charitable remainder trust (CRUT or CRAT), donors must assign the remainder of the trust to one or more charitable institutions for it to qualify as a charitable trust. The donor, however, may retain the right to change the charitable organization that will ultimately benefit from the trust. When educational institutions are involved in the creation of the trust (or when they serve as trustee), the trust must have wording that makes the assignment to the institution irrevocable for the institution to count and report the trust as a gift for purposes of reporting to the VSE Survey. Report revocable beneficiary designations in a charitable remainder trust to CASE in the same manner as bequest / legacy intentions"

    What this last little bit is saying is that if you are not the irrevocable beneficiary, you essentially can only record a pledge similar to how you would record a bequest expectancy.  When the CRUT pays out, you apply the proceeds against that pledge.  If the donor makes you an irrevocable beneficiary before they die, then you delete that pledge and record a gift per the first snippet - indicating both the face and present values.

    However, in each case when a CRUT is established - with you as either a revocable or irrevocable beneficiary - and with you as either the holder or not of the assets - that is when a gift is made and that is when a receipt is issued.  Not when the proceeds come in.

    CASE does point out that donors can reduce the number of payout years, which could generate a new tax deduction beyond the first deduction.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987


    On Fri, Jul 23, 2021 at 9:23 AM John Taylor <johntaylorconsulting@gmail.com> wrote:
    If you were the designated irrevocable beneficiary, you do not issue a receipt.  The gift was the original CRUT establishment.  The donor received a receipt per IRS rules then.  You should have recorded a gift then.  The payout is not a gift, so's not get a receipt, and is not counted in fundraising totals.

    You will want to acknowledge receiving the payout in a letter of some sort.  But nothing more.

    If, however, you were NOT the original irrevocable beneficiary, you would not have recorded a gift.  However, the donor would have already claimed a deduction.  In this case you CAN count the proceeds.  But still do not issue a tax receipt.  Just a letter of acknowledgment.

    John

    John H. Taylor 
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard