Private Letter Ruling on Reformation of CRT to CRUT

The addition of the IRC 2055(a) requirement in 1969 for a charitable deduction for assets transferred to a charitable remainder trust by an estate that the remainder be a charitable remainder unitrust, resulted in many disqualified charitable deductions for estates. The 1974 addition of IRC 2055(e)(3) allowed for post-mortem reformation of defective CRTs.

In Private Letter Ruling 201450003, the IRS went through the analysis of a successful reformation of a CRT to a CRUT. The reformation was a qualified reformation because it met the required elements of a reformable interest and qualified interest, and passed the equal duration and effective date tests.

See Elizabeth Bowers, Saving a Charitable Deduction Through Qualified Reformation, Wealth Management, Jan. 5, 2015.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.