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Trust Payments to Fulfill Charitable Pledge is Not Self-Dealing

By Gerry W. Beyer

PaymentA 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.

Posted in:
Estate Planning - Generally, Non-Probate Assets and Trusts