Thursday, June 12, 2014
A married couple created revocable trusts that converted after their deaths to irrevocable charitable lead annuity trusts (CLATS). Funds were then taken from the CLATS and used to honor a pledge made to a charity. The question of whether this transaction was self-dealing was posed to the IRS.
In private letter ruling LTR 201421014, the IRS determined that when a trust makes payments to fulfill a previous pledge to a charity, the donation is not considered self-dealing. This is because the pledge created an obligation for the trust and not the husband and wife.
See David Song, LTR 201421014: Payments Made to Charities by Trusts Not Self-Dealing, Wealth Strategies Journal, May 30, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.