The New York Times Quotes Manatt Partner on Charitable Trust Issues

“Charities Wrestle With Tax Uncertainty”
The New York Times

November 11, 2010 – The New York Times looked to Manatt’s Jill S. Dodd, a partner in the firm’s Family Wealth Transfer Planning and Trust & Estate Administration Practice Group and its Nonprofit Practice Group, for insight into issues facing a growing number of charities brought on by the recession and 2010’s hiatus from the Federal estate tax.

The New York Times reports that executors of some estates are showing reluctance to hand over bequests until next year, while others say they are in negotiations or even litigation over planned gifts from people who died this year without adjusting their wills to take into account the one-year suspension of the estate tax.

Dodd is quoted on what the newspaper identifies as a “subtle but potentially costly problem for those who created charitable remainder trusts through their wills, should they die this year.”   The issue could turn tax deductions into tax bills, Dodd says.

A charitable remainder trust is a tax-exempt entity.  The donor or a designee receives income from the trust for life or a term of years.  Whatever remains in the trust then goes to one or more charities.  The article reports that there are tens of thousands of such trusts.

In order for a charitable remainder trust established when someone dies to be tax-exempt, the gift to it from the estate must be deductible from the estate.  This year, there is no estate tax and thus, no charitable deduction, Dodd told The New York Times.

The problem can be resolved in several ways, Dodd said.  She advised that anyone whose will established a charitable remainder trust or had one that would shift income to an heir, should contact their lawyer immediately.

Read the article here.