SECTION 9. ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS GRANTOR CHARITABLE

LEAD UNITRUST

.01 Unitrust Period for the Life of One Individual .

(1) Explanation . As an alternative to establishing a CLUT for a term of years, the trust instrument of a grantor CLUT may

provide for payment of the unitrust amount for the life or lives of an individual or individuals. However, only one or more of the following individuals may be used as measuring lives: the donor, the donor’s spouse, and an individual who, with respect to all remainder beneficiaries (other than charitable organizations described in § 170, 2055, or 2522), is either a lineal ancestor or the spouse of a lineal ancestor of those beneficiaries. A trust will satisfy the requirement that each measuring life is a lineal ancestor (or the spouse of a lineal ancestor) of all noncharitable remainder beneficiaries if there is a less than 15 percent probability at the time of the contribution to the trust that individuals who are not lineal descendants of an individual who is a measuring life will receive any trust principal. The probability must be computed under the applicable tables in § 20.2031–7. Sections 1.170A–6(c)(2)(ii)(A), 20.2055–2(e)(2)(vii)( a ), and 25.2522(c)–3(c)(2)(vii)( a ). (2) Instruction for use . Replace the fifth and sixth sentences of paragraph 2, Payment of Unitrust Amount, of the sample trust

in section 7 with the following sentences:

The unitrust period is the lifetime of [ designated measuring life ]. 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 death of [ designated measuring life ].

.02 Retention of the Right to Substitute the Charitable Lead Beneficiary .

(1) Explanation . The donor to a grantor CLUT may retain the right to substitute another charitable beneficiary for the charitable

beneficiary named in the trust instrument and still claim a deduction under § 170(a) in the year of the transfer to the CLUT.

July 28, 2008 236 2008–30 I.R.B.

Note, however, that the retention of this right will cause the gift of the unitrust interest to be incomplete for gift tax purposes and will cause some or all of the trust property (depending on the date of the donor’s death) to be included in the donor’s gross estate. See §§ 2035, 2036(a)(2), and 2038(a)(1) and § 25.2511–2(c). See section 8.01(3) for a discussion of the income tax deductibility limitations applicable to contributions to a grantor CLUT. (2) Instruction for use . Replace the third sentence of paragraph 2, Payment of Unitrust Amount, of the sample trust in section

7 with the following two sentences: Notwithstanding the preceding sentences, the Donor reserves the right to designate as the charitable recipient, at any time and from time to time, in lieu of [ designated charitable recipient named above ], one or more organizations described in §§ 170(c), 2055(a), and 2522(a) and shall make any such designation by giving written notice to the Trustee. The term “the Charitable Organization” shall be used herein to refer collectively to the organization(s) then constituting the charitable recipient, whether named in this paragraph or subsequently selected as the substitute charitable recipient.

.03 Apportionment of the Unitrust Amount in the Discretion of the Trustee .

(1) Explanation . The donor or the trustee of a grantor charitable lead trust may be granted the power to apportion the unitrust

payment from time to time among a class of qualifying charitable beneficiaries. Note that a retained power of apportionment by the donor will cause the gift of the unitrust interest to be incomplete for gift tax purposes and will cause some or all of the trust property to be included in the donor’s gross estate. See §§ 2035(a), 2036(a)(2), and 2038(a)(1), and § 25.2511–2(c). (2) Instruction for use . Replace the first three sentences of paragraph 2, Payment of Unitrust Amount, of the sample trust in

section 7 with the following two sentences:

For each taxable year of the trust during the unitrust period, the Trustee shall pay to one or more members of a class comprised of organizations described in §§ 170(c), 2055(a), and 2522(a) (hereinafter, collectively “the Charitable Organization”) a unitrust amount equal to [ number representing the annual unitrust percentage to be paid to the Charitable Organization ] 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 Trustee may pay the unitrust amount to one or more members of the class, in equal or unequal shares, as the Trustee, in the Trustee’s sole discretion, from time to time may deem advisable.

.04 Designation of an Alternate Charitable Beneficiary in the Trust Instrument .

(1) Explanation . The sample trust in section 7 provides that, if the charitable beneficiary designated in the trust instrument is

not an organization described in §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the trustee shall distribute such payments to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) as the trustee shall select. As an alternative, the trust instrument may specifically designate one or more alternate charitable beneficiaries. See section 8.01(3) for a discussion of the income tax deductibility limitations applicable to contributions to a grantor CLUT. (2) Instruction for use . Replace the second sentence in paragraph 2, Payment of Unitrust Amount, of the sample trust in section

7 with the following two sentences: If [ designated charitable recipient ] is not an organization described in §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall instead distribute such payments to [ designated substitute charitable re- cipient ]. If neither [ designated charitable recipient ] nor [ designated substitute charitable recipient ] is an organization described in §§ 170(c), 2055(a), and 2522(a) at the time any payment is to be made to it, the Trustee shall distribute such payments to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) as the Trustee shall select, and in such proportions as the Trustee shall decide, from time to time, in the Trustee’s sole discretion.