Charitable Transfers - Answer Key

1. D

Private foundations must do their own record keeping, due diligence and file a Form 990-PF with the IRS annually. Most contributions come from a single source and these donors typically have a 30% limit on adjusted gross income for contributions to private foundations.


The advantages of the charitable annuity include: assets removed from the estate of the donor, partial tax deduction, annuity income for a lifetime and the personal satisfaction of donating funds to a charity of your choice.


A CRAT is the best choice for Kevin because it can be setup to provide a fixed income payment to him for the next 10 years in order to meet his mortgage payment needs. At the end of the 10-year period, the Humane Society will receive the remaining interest in the trust. Kevin will get an immediate charitable deduction from the present value of the remaining interest.


The keys here are that they want no involvement in the program selected, do not need any income and they want to create a family legacy. The donor advised fund is the only option that will accomplish all three of these wishes.


A charitable lead trust would be the best option because the trust could be setup for a 12-year term for which the church would still receive the income generated by the trust assets, and the grandchildren would get the remaining interest in the trust in 12 years.

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