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Frequently Asked Questions

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  1. How do I become a client of Lair Administration Services, LLC?
  2. When should I expect to receive my tax returns and annual report?
  3. Does your firm prepare legal documents?
  4. Do you offer any services prior to the creation of a charitable trust?
  5. What geographic area of the U.S. do you serve?
  6. When I make a contribution to a CRT, how much can I deduct for federal tax purposes?
  7. Can I use the full calculated charitable income tax deduction in the year of contribution?
  8. As an income beneficiary, do I have to pay tax on the annuity/unitrust distributions I receive from the CRT?
  9. Is any asset suitable for gifting to a CRT?
  10. Can I change the charitable organizations named in the trust instrument?

Q. How do I become a client of Lair Administration Services, LLC?
A. Simply complete and sign the Administration Agreement, Trust Data Form and Asset Contribution Data Form and return to us, along with a copy of the trust instrument (in the case of a CRT or CLT) or corporate formation documents and tax-exemption determination letter from the IRS (in the case of a foundation).

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Q. When should I expect to receive my tax returns and annual report?
A. Assuming we have received everything necessary for us to complete the preparation of your returns, for CRTs and CLTs we mail your trust's tax forms and annual report to you by March 1 and for private foundations by May 1.

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Q. Does your firm prepare legal documents?
A. No. We do however have attorneys outside our firm who specialize in the drafting of charitable trust and private foundation legal documents, whose competence and experience is without question. If you need such services, we will set up a conference call with the appropriate professional who can assist you in this process.

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Q. Do you offer any services prior to the creation of a charitable trust?
A. Yes. We are happy to provide CRT and CLT illustrations, which indicate possible charitable tax deductions and cash flow scenarios for those who might be interested in creating such a trust.

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Q. What geographic area of the U.S. do you serve?
A. We serve clients throughout the country. Our business is such that we can provide the same level of service whether you are across town or across the country.

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Q. When I make a contribution to a CRT, how much can I deduct for federal tax purposes?
A. Since a CRT will benefit both charitable and non-charitable beneficiaries, the donor may only deduct the charitable portion of the gift. The charitable income and gift tax deduction is equal to the present value of the remainder (charitable) interest and is generally figured based upon the fair market value of the asset being contributed, along with the pay-out rate of the trust, the age(s) of the beneficiary/trust term and the federal mid-term discount rate (IRC Section 7520 rate). In order for the CRT to be valid for the year of the contribution, the tax deduction must be equal to at least 10% or more of the value of the asset being contributed.

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Q. Can I use the full calculated charitable income tax deduction in the year of contribution?
A. Maybe. The income deduction you receive for your gift to the CRT will be limited in the same way any other charitable contribution is limited pursuant to IRC Section 170, based upon the adjusted gross income of the taxpayer, the type of asset given and the type of charitable remainderman named in the trust instrument. If the full deduction cannot be utilized in the year of contribution, the unused portion may be carried forward up to an additional five years.

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Q. As an income beneficiary, do I have to pay tax on the annuity/unitrust distributions I receive from the CRT?
A. Most likely, yes. Treasury Regulation 1.664-1(d)(1)(i) stipulates a four-tier system in which income must be distributed to non-charitable beneficiaries. Income passing through to beneficiaries from the CRT maintains the same tax character it was when earned by the trust. The Regulations require distributions to occur in the following order: ordinary income comes out first, then capital gains, then other income (often tax-exempt income) and finally trust corpus.

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Q. Is any asset suitable for gifting to a CRT?
A. No. Although the spectrum of assets that can be successfully given to a CRT is broad, there are several types that might create unexpected, negative tax consequences. Generally, gifts of cash, publicly traded securities, certain real property and certain C corporation stock make good candidates for transfer to a CRT. Assets that may be problematic are debt-encumbered property, certain pass-through entity interests (i.e. certain partnership/LLC interests) or any asset that generates Unrelated Business Taxable Income (UBTI is net income derived by a tax-exempt organization from any unrelated trade or business). Please consult appropriate tax counsel prior to gifting any asset to a CRT.

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Q. Can I change the charitable organizations named in the trust instrument?
A. Maybe. If the charities named in the trust instrument are not irrevocably named and if the power to change such "contingent" charities is present in the trust, then the answer is most likely, yes. As you can imagine for this and other reasons, a well-drafted CRT is of paramount importance.

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