SECTION 3. SCOPE — Internal Revenue Bulletin 2005-34

Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRUT having consecutive unitrust interests for two measuring lives that is created by an individual who is a citizen or resident of the United States. Section 5 of this revenue procedure provides annotations to the provisions of the sample trust. Section 6 of this revenue procedure provides samples of certain alternate provisions concerning: (.01) the payment of part of the unitrust amount to an organization described in § 170(c); (.02) a qualified contingency; (.03) a retained right to revoke the interest of the successor recipient; (.04) the last unitrust payments to the recipients; (.05) the restriction of the charitable remainderman to a public charity; (.06) a retained right to substitute the charitable remainderman; (.07) a power of appointment to designate the charitable remainderman; (.08) the net income method of calculating the unitrust amount; (.09) the net income with make-up method of calculating the unitrust amount; and (.10) a combination of methods for calculating the unitrust amount.

For transfers to a qualifying CRUT, as defined in § 664(d)(2) and, if applicable, § 664(d)(3), the remainder interest will be deductible by a citizen or resident of the United States under §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) for income, estate, and gift tax purposes, respectively, if the other requirements of §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) (that is, the requirements not relating to the provisions of the governing instrument) also are met. The Service will recognize a trust as a qualified CRUT meeting all of the requirements of § 664(d)(2) and, if applicable, § 664(d)(3), if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust under applicable local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure; or (ii) properly integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially similar to the sample in section 4 of this revenue procedure. A trust that contains substantive provisions in addition to those provided in section 4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under applicable local law that are not inconsistent with the applicable federal tax requirements), or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision from section 6 of this revenue procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be assured of qualification under the provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether an inter vivos trust created by an individual and having consecutive unitrust interests for two measuring lives qualifies as a CRUT. The Service, however, generally will issue letter rulings on the effect of substantive trust provisions, other than those contained in sections 4 and 6 of this revenue procedure, on the qualification of a trust as a CRUT.

August 22, 2005 353 2005–34 I.R.B.

SECTION 4. SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST — TWO LIVES, CONSECUTIVE INTERESTS

On this day of , 20 , I, (hereinafter “the Donor”), desiring to establish a charitable remainder unitrust, within the meaning of Rev. Proc. 2005–54 and § 664(d)(2) of the Internal Revenue Code (hereinafter “the Code”), hereby enter into this trust agreement with as the initial trustee (hereinafter “the Trustee”). This trust shall be known as the Charitable Remainder Unitrust.

Funding of Trust . The Donor hereby transfers and irrevocably assigns, on the above date, to the Trustee the property described in Schedule A, and the Trustee accepts the property and agrees to hold, manage, and distribute the property, and any property subsequently transferred, under the terms set forth in this trust instrument.
Payment of Unitrust Amount . In each taxable year of the trust during the unitrust period, the Trustee shall pay to [ permissible recipient ] (hereinafter “the Initial Recipient”) until the Initial Recipient’s death, and thereafter to [ permissible recipient ] (hereinafter “the Successor Recipient”), a unitrust amount equal to [ a number no less than 5 and no more than 50 ] percent of the net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter “the valuation date”). The first day of the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust period shall be the date of the death of the survivor of the Initial Recipient and the Successor Recipient. The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and, to the extent income is not sufficient, from principal. Any income of the trust for a taxable year in excess of the unitrust amount shall be added to principal. If, for any year, the net fair market value of the trust assets is incorrectly determined, then within a reasonable period after the correct value is finally determined, the Trustee shall pay to the Initial Recipient and/or the Successor Recipient (in the case of an undervaluation) or receive from the Initial Recipient and/or the Successor Recipient (in the case of an overvaluation) an amount equal to the difference between the unitrust amount(s) properly payable and the unitrust amount(s) actually paid.
Payment of Federal Estate Taxes and State Death Taxes . The lifetime unitrust interest of the Successor Recipient will take effect upon the death of the Initial Recipient only if the Successor Recipient furnishes the funds for payment of any federal estate taxes and state death taxes for which the Trustee may be liable upon the death of the Initial Recipient. If the funds are not furnished by the Successor Recipient, the unitrust period shall terminate on the death of the Initial Recipient, notwithstanding any other provision in this instrument to the contrary.
Proration of Unitrust Amount . For a short taxable year and for the taxable year during which the unitrust period ends, the Trustee shall prorate on a daily basis the unitrust amount described in paragraph 2, or, if an additional contribution is made to the trust, the unitrust amount described in paragraph 6. If the Successor Recipient survives the Initial Recipient, the Trustee shall prorate on a daily basis the next regular unitrust payment due after the death of the Initial Recipient between the estate of the Initial Recipient and the Successor Recipient.
Distribution to Charity . At the termination of the unitrust period, the Trustee shall distribute all of the then principal and income of the trust (other than any amount due the Initial Recipient and/or the Successor Recipient under the terms of this trust) to [ desig- nated remainderman ] (hereinafter “the Charitable Organization”). If the Charitable Organization is not an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the then principal and income to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
Additional Contributions . If any additional contributions are made to the trust after the initial contribution, the unitrust amount for the year in which any additional contribution is made shall be [ same percentage used in paragraph 2 ] percent of the sum of (a) the net fair market value of the trust assets as of the valuation date (excluding the assets so added and any post-contribution income from, and appreciation on, such assets during that year) and (b) for each additional contribution during the year, the fair market value of the assets so added as of the valuation date (including any post-contribution income from, and appreciation on, such assets through the valuation date) multiplied by a fraction the numerator of which is the number of days in the period that begins with the date of contribution and ends with the earlier of the last day of the taxable year or the last day of the unitrust period and the denominator of which is the number of days in the period that begins with the first day of such taxable year and ends with the earlier of the last day in such taxable year or the last day of the unitrust period. In a taxable year in which an additional contribution is made on or after the valuation date, the assets so added shall be valued as of the date of contribution, without regard to any post-contribution income or appreciation, rather than as of the valuation date.
Deferral of the Unitrust Payment Allocable to Testamentary Transfer . All property passing to the trust by reason of the death of the Donor (hereinafter “the testamentary transfer”) shall be considered to be a single contribution that is made on the date of the Donor’s death. Notwithstanding the provisions of paragraphs 2 and 6 above, the obligation to pay the unitrust amount with respect to the testamentary transfer shall commence with the date of the Donor’s death. Nevertheless, payment of the unitrust amount with respect to the testamentary transfer may be deferred from the date of the Donor’s death until the end of the taxable year in which the funding of the testamentary transfer is completed. Within a reasonable time after the end of the taxable year in which the testamentary transfer is completed, the Trustee must pay to the Initial Recipient and/or the Successor Recipient (in the case of an underpayment) or receive from the Initial Recipient and/or the Successor Recipient (in the case of an overpayment) the difference between any unitrust amounts allocable to the testamentary transfer that were actually paid, plus interest, and the unitrust amounts allocable to the testa

2005–34 I.R.B. 354 August 22, 2005

mentary transfer that were payable, plus interest. The interest shall be computed for any period at the rate of interest, compounded annually, that the federal income tax regulations under § 664 of the Code prescribe for this computation.

Unmarketable Assets . Whenever the value of a trust asset must be determined, the Trustee shall determine the value of any assets that are not cash, cash equivalents, or other assets that can be readily sold or exchanged for cash or cash equivalents (hereinafter “unmarketable assets”), by either (a) obtaining a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and § 1.170A–13(c)(5) of the Income Tax Regulations, respectively, or (b) ensuring the valuation of these unmarketable assets is performed exclusively by an “independent trustee,” within the meaning of § 1.664–1(a)(7)(iii) of the Income Tax Regulations.
Prohibited Transactions . The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code, as modified by § 4947(a)(2)(A) of the Code.
Taxable Year . The taxable year of the trust shall be the calendar year.
Governing Law . The operation of the trust shall be governed by the laws of the State of . However, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the qualification of the trust as a charitable remainder unitrust under § 664(d)(2) of the Code and the corresponding regulations.
Limited Power of Amendment . This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a charitable remainder unitrust within the meaning of § 664(d)(2) of the Code.
Investment of Trust Assets . Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of trust assets.
Definition of Initial Recipient and Successor Recipient . References to the Initial Recipient and/or the Successor Recipient in this trust instrument shall be deemed to include the estate of the Initial Recipient and/or the Successor Recipient with regard to all provisions in this trust instrument that describe amounts payable to and/or due from the Initial Recipient and/or the Successor Recipient. The prior sentence shall not apply to the determination of the last day of the unitrust period.