CRT safe harbor for spousal rights extended - waivers not required.

• Author: Sherr, Eileen
• Position: Charitable remainder trusts

In response to requests by the AICPA (https://tax.aicpa.org/NIVrdonlyres/5F4E82A543BO-48F5-B155-136D99BSE13C/ O/dean_rev_proc_2005_24_letter.doc) and others, the IRS has provided, in recently issued Notice 2006-15, an extension of the June 28, 2005 safe-harbor grandfather date (from Rev. Proc. 2005-24), which applies to certain charitable remainder annuity trusts (CRATs) or charitable remainder unitrusts (CRUTs). The revenue procedure deals with the effect of a spousal right of election on a trust's qualification as a CRAT or CRUT. The extended safe-harbor date is effective until further guidance is issued by the IRS. Until then, the IRS will disregard an existing spousal right of election, even without a waiver as described in Rev. Proc. 2005-24, but only if the surviving spouse does not exercise the right of election. In a recent letter to the IRS (https://tax.aicpa.org/Resources/Trust+Estate+and+Gift/Trusts/), the AICPA thanked the Service for this notice and for responding to its concerns and adopting (until further study) its recommendation of extending the safe harbor to all trusts regardless of the creation date. Also, because a spousal waiver requirement could potentially affect all CRTs, the AICPA suggested that any future guidance in this area be published in proposed form, thereby allowing practitioners an opportunity to comment on its feasibility before it becomes effective.

As noted in the May 2, 2005 e-alert (https://tax.aicpa.org/NR/rdonlyres/ 9014F454-5AC6-4A26-B50C-D3AA76ADB726/O/EAlert050205.pdf) and in News Notes, Thorne and Sherr, "Rev. Proc. 2005-24 Requires Spousal Waiver to Avoid CRT Disqualification," TTA, July 2005, p. 385, Rev. Proc. 2005-24 provided a safe-harbor procedure for...