(Archived Content)
JS-2344
WASHINGTON, DC -- The Treasury Department and Internal Revenue Service issued guidance today to provide a safe harbor procedure to avoid the disqualification of a charitable remainder trust by reason of the existence of a spousal right of election under state law.
The existence of a surviving spouse's right to elect to receive a statutory share of the estate of the grantor of a charitable remainder trust has not been widely recognized by taxpayers as potentially disqualifying the trust. The safe harbor in the revenue procedure issued today provides a method of avoiding the adverse tax consequences arising from such a right under state law. The revenue procedure issued today also provides transition relief for trusts created before June 28, 2005 .
A problem exists under current law only if applicable state law gives the grantor's spouse the right to receive a statutory share of the grantor's estate that could be paid from the trust's assets. For trusts created on or after June 28, 2005 , this problem can be avoided if the grantor's spouse waives the right of election against trust assets as described in the revenue procedure.
Trusts created before June 28, 2005 , may also benefit from this safe harbor procedure. However, as long as the spousal right of election is not actually exercised, the Service will not challenge the qualification of a pre-June 28, 2005, trust solely by reason of the existence of that right, even if such a waiver is not obtained.
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