Opinion ID: 76014
Heading Depth: 3
Heading Rank: 1

Heading: Applicability of CRAT Regulations

Text: 17 The estate argues that the CRAT rules have no application where, as here, none of the non-charitable beneficiaries ever qualified under the terms of the trust. According to the estate, the failure of the non-charitable beneficiaries to qualify means that no interest passed, within the meaning of § 2055(e)(2), 4 both to these non-charitable beneficiaries and to the charities so as to invoke the CRAT rules. The IRS regulations refute the estate's argument. According to Treas. Reg. § 20.2056(c)-1(a)(5) (as amended in 1994), property interests transferred during the life of the decedent are immediately considered to have passed from the decedent to the recipient for purposes of § 2055(e)(2). 5 Though these interests may be contingent, the contingency does not mean that the interests do not immediately pass unless the possibility of the contingency occurring is so remote as to be negligible. Treas. Reg. § 20.2055-2(e)(1)(i) (as amended in 2001). The non-charitable beneficiaries each received a property interest, contingent on their acceptance of their share of the estate's tax burden, in the trust upon its establishment. The possibility of at least one beneficiary accepting the trust's terms and fulfilling the contingency cannot be said to be remote; therefore, their interests immediately passed under § 2055(e)(2) when the trust was established. From that moment on, the trust was required to operate as a CRAT in order to preserve its ability to qualify for a deduction of the charitable remainder.