The rate of return that determines income earned on trust assets — term interests, life interests, annuities and remainders — is established through IRC Code Section 7520. Published each month by the IRS based on the previous month’s weighted average market yield for marketable treasure obligations of the same duration (short-term, mid-term and long-term), this rate is 120 percent of the “applicable federal rate” for mid-term obligations with semiannual compounding.
As noted in an earlier column, a charitable remainder trust (CRT) is a valuable tax-planning tool. However, Revenue Procedure 2005-24, issued on March 30, adds new rules to CRTs to address the problem of spouses “electing against the will,” which can arise in certain states.
A basic tenet of a CRT is that only the unitrust or annuity trust payment may be made to a non-charitable recipient.