§ 36C‑4B‑5. Administrative provisions applicable to charitable remainder trusts only.
(a) Creation of AnnuityAmount for Period of Years or Life. In each taxable year of the trust, thetrustee shall pay the annuity amount designated in the trust instrument to thebeneficiaries named in the trust instrument during their lives or, if thegoverning instrument so provides, for a period of 20 years or less. The annuityamount shall be paid annually or in more frequent equal or unequal installmentsif the governing instrument so provides. The annuity amount shall be paid fromincome and, to the extent that income is not sufficient, from principal. Anyincome of the trust for a taxable year in excess of the annuity amount shall beadded to principal.
The total amount payable atleast annually to a person or persons named in the trust document, at least oneof which is not an organization described in section 170(c) of the InternalRevenue Code, may not be less than five percent (5%) of the initial net fairmarket value of the property placed in trust as finally determined for federaltax purposes, except as provided in subsection (g) of this section.
(b) Computation ofAnnuity Amount in Short and Final Taxable Years. For a short taxable year andfor the taxable year in which the noncharitable beneficiary's interestterminates by death or otherwise, the trustee shall prorate the annuity amounton a daily basis.
(c) Prohibition ofAdditional Contributions. No additional contributions shall be made to thetrust after the initial contribution.
(d) Deferral of AnnuityAmount During Period of Administration or Settlement. When property passes tothe trust at the death of the settlor, the obligation to pay the annuity amountcommences with the date of death of the settlor, but payment of the annuityamount may be deferred from the date of the settlor's death to the end of thetaxable year in which complete funding of the trust occurs. Within a reasonabletime after the end of the taxable year in which the complete funding of thetrust occurs, the trustee must pay to the beneficiary, in the case of anunderpayment, or must receive from the beneficiary, in the case of anoverpayment, the difference between:
(1) Any annuity amountsactually paid, plus interest on those amounts computed at ten percent (10%) ayear, compounded annually; and
(2) The annuity amountspayable, determined under the method described in Section 1.664‑1(a)(5)of the federal income tax regulations, plus interest on those amounts computedat ten percent (10%) a year, compounded annually.
Notwithstanding the foregoingsentence, in computing any underpayment or overpayment of the annuity amounts,if the governing instrument was executed or last amended before August 9, 1984,and if the governing instrument does not specify that a ten percent (10%) rateof interest shall be used, the underpayment or overpayment of the annuityamounts must be computed using an interest rate at six percent (6%) a year,compounded annually.
(e) Dollar AmountAnnuity May Be Stated as Fraction or Percentage. If the governing instrumentof the trust states the amount of the annuity as a fraction or a percentage,the trustee must pay to the beneficiaries in each taxable year of the trustduring their lives an annuity amount equal to a percentage (that percentagebeing stipulated in the governing instrument of the trust and, in any event,being five percent (5%) or greater) of the initial net fair market value of theassets constituting the trust. In determining this amount, assets shall bevalued at their values as finally determined for federal tax purposes. If thefiduciary incorrectly determines the initial net fair market value of theassets constituting the trust, then, within a reasonable period after a finaldetermination, the trustee shall pay to the beneficiaries, in the case of anundervaluation or shall receive from the beneficiaries, in the case of anovervaluation, an amount equal to the difference between the annuity amountproperly payable and the annuity amount actually paid.
(f) Annuity Amount MayBe Allocated Among Class of Noncharitable Beneficiaries in Discretion ofTrustee. If the governing instrument of the trust provides that the annuitytrust amount may be allocated among a class of noncharitable beneficiaries inthe discretion of the trustee, then the trustee must pay the annuity amount,which is defined in the governing instrument of the trust, in each taxable yearof the trust, to the member or members of the class of noncharitablebeneficiaries in an amount and proportions as the trustee in the trustee'sabsolute discretion shall from time to time determine until the last of thenoncharitable beneficiaries dies. The trustee may pay the entire annuity amountto one member of this class or may apportion it among the various members in amanner as the trustee from time to time considers advisable as long as thepower to allocate does not cause any person to be treated as the owner of anypart of the trust under the rules of section 671 through section 678 of theInternal Revenue Code. If the class provided for in the governing instrument isopen, then the distribution must be for a period of years not to exceed 20years, notwithstanding a provision to the contrary in the trust instrument. Ifthe class provided for in the governing instrument is closed at the creation ofthe trust, and all members of the class are ascertainable, the distribution maybe for the lives of the members of the class or for a period not exceeding 20years. The trustee shall pay the entire annuity amount for each taxable yearannually and may not delay payment of the annuity amount.
(g) Reduction ofAnnuity Amount If Part of Corpus Is Paid to Charity at Expiration of Term ofYears or on Death of Recipient. If the governing instrument of the trustprovides for the reduction of the annuity amount if part of the corpus is paidto charity at the expiration of a term of years or upon the death of arecipient, then during the term of years or during the joint lives of thenoncharitable beneficiaries, the trustee shall, in each taxable year of thetrust, pay a total annuity amount of at least five percent (5%) of the initialnet fair market value of the assets placed in trust. Upon the expiration of theterm of years or the death of a beneficiary, the trustee shall distribute anamount or percentage of the trust assets, as provided in the governinginstrument of the trust, to the charity named in the governing instrument, andthereafter the trustee shall pay, annually or in more frequent installments, tothe survivors for their lives, an annuity amount that in each taxable year ofthe trust, bears the same ratio to five percent (5%) of the initial net fairmarket value of the trust assets as the net fair market value of the trustassets valued as of the date of distribution, less the amount or percentage oftrust assets distributed to the charity, bears to the net fair market value ofthe trust assets as of the date of distribution.
(h) Termination ofAnnuity Amount on Payment Date Preceding Termination of Noncharitable Interest. If the governing instrument of the trust provides that payment of the annuityamount may terminate with the regular payment preceding the termination of allnoncharitable interests, then the trustee must pay to the noncharitablebeneficiary during the term of the noncharitable interest the annuity amount,defined in the trust document, in each taxable year of the trust. Theobligation of the trustee to pay the annuity amount shall terminate with thepayment preceding the death of the noncharitable beneficiary or other eventthat terminates the noncharitable interest.
(i) Retention ofTestamentary Power to Revoke Noncharitable Interest. If the governinginstrument of the trust provides that the settlor of the trust retains thepower, exercisable only by will, to revoke or terminate the interest of anyrecipient other than an organization described in section 170(c) of theInternal Revenue Code, then the trustee shall pay to the settlor during thesettlor's life the annuity amount, as defined in the governing instrument ofthe trust and, upon the death of the settlor, if the noncharitable beneficiarysurvives the settlor, the trustee must pay to the noncharitable beneficiaryduring that beneficiary's life the annuity amount equal to the amount paid tothe settlor. The settlor shall have the power, exercisable only by will, torevoke and terminate the interest of the noncharitable beneficiary under thetrust. Upon the first to occur of (i) the death of the survivor of the settlorand noncharitable beneficiary; or (ii) the death of the settlor if the settloreffectively exercised the settlor's testamentary power to revoke and terminatethe interest of the noncharitable beneficiary, the trustee must distribute allof the then principal and income of the trust, other than any amount due thesettlor or noncharitable beneficiary, to the charity named in the trustdocument or, if the governing instrument so provides, the trustee must continueto hold the principal and income in trust for the charity or for the charitablepurposes specified in the trust. No other retained power to terminate aninterest in the trust is effective. (1981 (Reg. Sess., 1982), c. 1252, s. 1; 1985, c. 406,s. 6; 2005‑192, s. 2.)
§ 36C‑4B‑5. Administrative provisions applicable to charitable remainder trusts only.
(a) Creation of AnnuityAmount for Period of Years or Life. In each taxable year of the trust, thetrustee shall pay the annuity amount designated in the trust instrument to thebeneficiaries named in the trust instrument during their lives or, if thegoverning instrument so provides, for a period of 20 years or less. The annuityamount shall be paid annually or in more frequent equal or unequal installmentsif the governing instrument so provides. The annuity amount shall be paid fromincome and, to the extent that income is not sufficient, from principal. Anyincome of the trust for a taxable year in excess of the annuity amount shall beadded to principal.
The total amount payable atleast annually to a person or persons named in the trust document, at least oneof which is not an organization described in section 170(c) of the InternalRevenue Code, may not be less than five percent (5%) of the initial net fairmarket value of the property placed in trust as finally determined for federaltax purposes, except as provided in subsection (g) of this section.
(b) Computation ofAnnuity Amount in Short and Final Taxable Years. For a short taxable year andfor the taxable year in which the noncharitable beneficiary's interestterminates by death or otherwise, the trustee shall prorate the annuity amounton a daily basis.
(c) Prohibition ofAdditional Contributions. No additional contributions shall be made to thetrust after the initial contribution.
(d) Deferral of AnnuityAmount During Period of Administration or Settlement. When property passes tothe trust at the death of the settlor, the obligation to pay the annuity amountcommences with the date of death of the settlor, but payment of the annuityamount may be deferred from the date of the settlor's death to the end of thetaxable year in which complete funding of the trust occurs. Within a reasonabletime after the end of the taxable year in which the complete funding of thetrust occurs, the trustee must pay to the beneficiary, in the case of anunderpayment, or must receive from the beneficiary, in the case of anoverpayment, the difference between:
(1) Any annuity amountsactually paid, plus interest on those amounts computed at ten percent (10%) ayear, compounded annually; and
(2) The annuity amountspayable, determined under the method described in Section 1.664‑1(a)(5)of the federal income tax regulations, plus interest on those amounts computedat ten percent (10%) a year, compounded annually.
Notwithstanding the foregoingsentence, in computing any underpayment or overpayment of the annuity amounts,if the governing instrument was executed or last amended before August 9, 1984,and if the governing instrument does not specify that a ten percent (10%) rateof interest shall be used, the underpayment or overpayment of the annuityamounts must be computed using an interest rate at six percent (6%) a year,compounded annually.
(e) Dollar AmountAnnuity May Be Stated as Fraction or Percentage. If the governing instrumentof the trust states the amount of the annuity as a fraction or a percentage,the trustee must pay to the beneficiaries in each taxable year of the trustduring their lives an annuity amount equal to a percentage (that percentagebeing stipulated in the governing instrument of the trust and, in any event,being five percent (5%) or greater) of the initial net fair market value of theassets constituting the trust. In determining this amount, assets shall bevalued at their values as finally determined for federal tax purposes. If thefiduciary incorrectly determines the initial net fair market value of theassets constituting the trust, then, within a reasonable period after a finaldetermination, the trustee shall pay to the beneficiaries, in the case of anundervaluation or shall receive from the beneficiaries, in the case of anovervaluation, an amount equal to the difference between the annuity amountproperly payable and the annuity amount actually paid.
(f) Annuity Amount MayBe Allocated Among Class of Noncharitable Beneficiaries in Discretion ofTrustee. If the governing instrument of the trust provides that the annuitytrust amount may be allocated among a class of noncharitable beneficiaries inthe discretion of the trustee, then the trustee must pay the annuity amount,which is defined in the governing instrument of the trust, in each taxable yearof the trust, to the member or members of the class of noncharitablebeneficiaries in an amount and proportions as the trustee in the trustee'sabsolute discretion shall from time to time determine until the last of thenoncharitable beneficiaries dies. The trustee may pay the entire annuity amountto one member of this class or may apportion it among the various members in amanner as the trustee from time to time considers advisable as long as thepower to allocate does not cause any person to be treated as the owner of anypart of the trust under the rules of section 671 through section 678 of theInternal Revenue Code. If the class provided for in the governing instrument isopen, then the distribution must be for a period of years not to exceed 20years, notwithstanding a provision to the contrary in the trust instrument. Ifthe class provided for in the governing instrument is closed at the creation ofthe trust, and all members of the class are ascertainable, the distribution maybe for the lives of the members of the class or for a period not exceeding 20years. The trustee shall pay the entire annuity amount for each taxable yearannually and may not delay payment of the annuity amount.
(g) Reduction ofAnnuity Amount If Part of Corpus Is Paid to Charity at Expiration of Term ofYears or on Death of Recipient. If the governing instrument of the trustprovides for the reduction of the annuity amount if part of the corpus is paidto charity at the expiration of a term of years or upon the death of arecipient, then during the term of years or during the joint lives of thenoncharitable beneficiaries, the trustee shall, in each taxable year of thetrust, pay a total annuity amount of at least five percent (5%) of the initialnet fair market value of the assets placed in trust. Upon the expiration of theterm of years or the death of a beneficiary, the trustee shall distribute anamount or percentage of the trust assets, as provided in the governinginstrument of the trust, to the charity named in the governing instrument, andthereafter the trustee shall pay, annually or in more frequent installments, tothe survivors for their lives, an annuity amount that in each taxable year ofthe trust, bears the same ratio to five percent (5%) of the initial net fairmarket value of the trust assets as the net fair market value of the trustassets valued as of the date of distribution, less the amount or percentage oftrust assets distributed to the charity, bears to the net fair market value ofthe trust assets as of the date of distribution.
(h) Termination ofAnnuity Amount on Payment Date Preceding Termination of Noncharitable Interest. If the governing instrument of the trust provides that payment of the annuityamount may terminate with the regular payment preceding the termination of allnoncharitable interests, then the trustee must pay to the noncharitablebeneficiary during the term of the noncharitable interest the annuity amount,defined in the trust document, in each taxable year of the trust. Theobligation of the trustee to pay the annuity amount shall terminate with thepayment preceding the death of the noncharitable beneficiary or other eventthat terminates the noncharitable interest.
(i) Retention ofTestamentary Power to Revoke Noncharitable Interest. If the governinginstrument of the trust provides that the settlor of the trust retains thepower, exercisable only by will, to revoke or terminate the interest of anyrecipient other than an organization described in section 170(c) of theInternal Revenue Code, then the trustee shall pay to the settlor during thesettlor's life the annuity amount, as defined in the governing instrument ofthe trust and, upon the death of the settlor, if the noncharitable beneficiarysurvives the settlor, the trustee must pay to the noncharitable beneficiaryduring that beneficiary's life the annuity amount equal to the amount paid tothe settlor. The settlor shall have the power, exercisable only by will, torevoke and terminate the interest of the noncharitable beneficiary under thetrust. Upon the first to occur of (i) the death of the survivor of the settlorand noncharitable beneficiary; or (ii) the death of the settlor if the settloreffectively exercised the settlor's testamentary power to revoke and terminatethe interest of the noncharitable beneficiary, the trustee must distribute allof the then principal and income of the trust, other than any amount due thesettlor or noncharitable beneficiary, to the charity named in the trustdocument or, if the governing instrument so provides, the trustee must continueto hold the principal and income in trust for the charity or for the charitablepurposes specified in the trust. No other retained power to terminate aninterest in the trust is effective. (1981 (Reg. Sess., 1982), c. 1252, s. 1; 1985, c. 406,s. 6; 2005‑192, s. 2.)
§ 36C‑4B‑5. Administrative provisions applicable to charitable remainder trusts only.
(a) Creation of AnnuityAmount for Period of Years or Life. In each taxable year of the trust, thetrustee shall pay the annuity amount designated in the trust instrument to thebeneficiaries named in the trust instrument during their lives or, if thegoverning instrument so provides, for a period of 20 years or less. The annuityamount shall be paid annually or in more frequent equal or unequal installmentsif the governing instrument so provides. The annuity amount shall be paid fromincome and, to the extent that income is not sufficient, from principal. Anyincome of the trust for a taxable year in excess of the annuity amount shall beadded to principal.
The total amount payable atleast annually to a person or persons named in the trust document, at least oneof which is not an organization described in section 170(c) of the InternalRevenue Code, may not be less than five percent (5%) of the initial net fairmarket value of the property placed in trust as finally determined for federaltax purposes, except as provided in subsection (g) of this section.
(b) Computation ofAnnuity Amount in Short and Final Taxable Years. For a short taxable year andfor the taxable year in which the noncharitable beneficiary's interestterminates by death or otherwise, the trustee shall prorate the annuity amounton a daily basis.
(c) Prohibition ofAdditional Contributions. No additional contributions shall be made to thetrust after the initial contribution.
(d) Deferral of AnnuityAmount During Period of Administration or Settlement. When property passes tothe trust at the death of the settlor, the obligation to pay the annuity amountcommences with the date of death of the settlor, but payment of the annuityamount may be deferred from the date of the settlor's death to the end of thetaxable year in which complete funding of the trust occurs. Within a reasonabletime after the end of the taxable year in which the complete funding of thetrust occurs, the trustee must pay to the beneficiary, in the case of anunderpayment, or must receive from the beneficiary, in the case of anoverpayment, the difference between:
(1) Any annuity amountsactually paid, plus interest on those amounts computed at ten percent (10%) ayear, compounded annually; and
(2) The annuity amountspayable, determined under the method described in Section 1.664‑1(a)(5)of the federal income tax regulations, plus interest on those amounts computedat ten percent (10%) a year, compounded annually.
Notwithstanding the foregoingsentence, in computing any underpayment or overpayment of the annuity amounts,if the governing instrument was executed or last amended before August 9, 1984,and if the governing instrument does not specify that a ten percent (10%) rateof interest shall be used, the underpayment or overpayment of the annuityamounts must be computed using an interest rate at six percent (6%) a year,compounded annually.
(e) Dollar AmountAnnuity May Be Stated as Fraction or Percentage. If the governing instrumentof the trust states the amount of the annuity as a fraction or a percentage,the trustee must pay to the beneficiaries in each taxable year of the trustduring their lives an annuity amount equal to a percentage (that percentagebeing stipulated in the governing instrument of the trust and, in any event,being five percent (5%) or greater) of the initial net fair market value of theassets constituting the trust. In determining this amount, assets shall bevalued at their values as finally determined for federal tax purposes. If thefiduciary incorrectly determines the initial net fair market value of theassets constituting the trust, then, within a reasonable period after a finaldetermination, the trustee shall pay to the beneficiaries, in the case of anundervaluation or shall receive from the beneficiaries, in the case of anovervaluation, an amount equal to the difference between the annuity amountproperly payable and the annuity amount actually paid.
(f) Annuity Amount MayBe Allocated Among Class of Noncharitable Beneficiaries in Discretion ofTrustee. If the governing instrument of the trust provides that the annuitytrust amount may be allocated among a class of noncharitable beneficiaries inthe discretion of the trustee, then the trustee must pay the annuity amount,which is defined in the governing instrument of the trust, in each taxable yearof the trust, to the member or members of the class of noncharitablebeneficiaries in an amount and proportions as the trustee in the trustee'sabsolute discretion shall from time to time determine until the last of thenoncharitable beneficiaries dies. The trustee may pay the entire annuity amountto one member of this class or may apportion it among the various members in amanner as the trustee from time to time considers advisable as long as thepower to allocate does not cause any person to be treated as the owner of anypart of the trust under the rules of section 671 through section 678 of theInternal Revenue Code. If the class provided for in the governing instrument isopen, then the distribution must be for a period of years not to exceed 20years, notwithstanding a provision to the contrary in the trust instrument. Ifthe class provided for in the governing instrument is closed at the creation ofthe trust, and all members of the class are ascertainable, the distribution maybe for the lives of the members of the class or for a period not exceeding 20years. The trustee shall pay the entire annuity amount for each taxable yearannually and may not delay payment of the annuity amount.
(g) Reduction ofAnnuity Amount If Part of Corpus Is Paid to Charity at Expiration of Term ofYears or on Death of Recipient. If the governing instrument of the trustprovides for the reduction of the annuity amount if part of the corpus is paidto charity at the expiration of a term of years or upon the death of arecipient, then during the term of years or during the joint lives of thenoncharitable beneficiaries, the trustee shall, in each taxable year of thetrust, pay a total annuity amount of at least five percent (5%) of the initialnet fair market value of the assets placed in trust. Upon the expiration of theterm of years or the death of a beneficiary, the trustee shall distribute anamount or percentage of the trust assets, as provided in the governinginstrument of the trust, to the charity named in the governing instrument, andthereafter the trustee shall pay, annually or in more frequent installments, tothe survivors for their lives, an annuity amount that in each taxable year ofthe trust, bears the same ratio to five percent (5%) of the initial net fairmarket value of the trust assets as the net fair market value of the trustassets valued as of the date of distribution, less the amount or percentage oftrust assets distributed to the charity, bears to the net fair market value ofthe trust assets as of the date of distribution.
(h) Termination ofAnnuity Amount on Payment Date Preceding Termination of Noncharitable Interest. If the governing instrument of the trust provides that payment of the annuityamount may terminate with the regular payment preceding the termination of allnoncharitable interests, then the trustee must pay to the noncharitablebeneficiary during the term of the noncharitable interest the annuity amount,defined in the trust document, in each taxable year of the trust. Theobligation of the trustee to pay the annuity amount shall terminate with thepayment preceding the death of the noncharitable beneficiary or other eventthat terminates the noncharitable interest.
(i) Retention ofTestamentary Power to Revoke Noncharitable Interest. If the governinginstrument of the trust provides that the settlor of the trust retains thepower, exercisable only by will, to revoke or terminate the interest of anyrecipient other than an organization described in section 170(c) of theInternal Revenue Code, then the trustee shall pay to the settlor during thesettlor's life the annuity amount, as defined in the governing instrument ofthe trust and, upon the death of the settlor, if the noncharitable beneficiarysurvives the settlor, the trustee must pay to the noncharitable beneficiaryduring that beneficiary's life the annuity amount equal to the amount paid tothe settlor. The settlor shall have the power, exercisable only by will, torevoke and terminate the interest of the noncharitable beneficiary under thetrust. Upon the first to occur of (i) the death of the survivor of the settlorand noncharitable beneficiary; or (ii) the death of the settlor if the settloreffectively exercised the settlor's testamentary power to revoke and terminatethe interest of the noncharitable beneficiary, the trustee must distribute allof the then principal and income of the trust, other than any amount due thesettlor or noncharitable beneficiary, to the charity named in the trustdocument or, if the governing instrument so provides, the trustee must continueto hold the principal and income in trust for the charity or for the charitablepurposes specified in the trust. No other retained power to terminate aninterest in the trust is effective. (1981 (Reg. Sess., 1982), c. 1252, s. 1; 1985, c. 406,s. 6; 2005‑192, s. 2.)
