CRUT problem (Charitable Remainder Unit Trust)

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CRUT problem (Charitable Remainder Unit Trust)


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Old 4th December 2018, 10:30 PM
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Default CRUT problem (Charitable Remainder Unit Trust)

Hello, me again. My parents left a trail of financial destruction when they died in Massachusetts; its been 2 years and we are nowhere near finished untangling the threads.

This is a Charitable Status question. There was a Charitable Remainder Trust (CRUT) which the bank has advised us should now be dissolved - the remaining monies to be distributed to charities. So, we nominated some charities, and since i live in the UK i nominated my local Parish Church (part of the Church in Wales). The other nominated charities are all in the USA.

Papers were drawn up, and the Parish Church contacted with the good news. However, the bank (US Trust) is now telling me that unless the Parish meets the IRS requirements of being a 501 (c) (3) charity or a IRC 170(c) that they cannot receive the funds.

They are now asking if the Church here has an affiliate in the USA!!!
What is going on? Is it true that charitable donations can only be made to USA based charities.

Does anyone have any knowledge or views on this?


Last edited by sueinwales; 4th December 2018 at 10:31 PM. Reason: forgot part of sentence
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Old 5th December 2018, 06:25 AM
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Generally speaking, yes, the charitable donations have to be made to a 501 (c)(3) organization. One possible "out" may be whatever inheritance tax treaty there may be between the US and UK (but that's a long shot).

I know the US-France treaty covering inheritance tax has some sort of clause that allows charitable organizations recognized by the other country's tax service to receive donations from the estate tax free. But it only applies to inheritance taxes, not to income or other taxes. You might check to see if such a clause exists in the UK treaty and then if it could be applied to the trust.

But yes, as a matter of fact, the French Fisc doesn't recognize "charitable donations" to US charities, nor does the IRS recognize donations for French causes - except under that specific clause for inheritance taxes.

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Old 17th December 2018, 08:56 AM
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The following may be of some assistance.

Consider first the issue of UK resident US citizens who wish to make charitable contributions and receive tax deductions under both systems. The basic position is that the US recognises only US based charities; the UK recognises only EU based charities. It would therefore appear to be impossible to obtain deductions in both systems.

The solution lies in a structure where a US charity owns a UK charity. The contribution is made to the UK charity, and accordingly obtains UK tax relief. More surprisingly, the US allows the contribution to qualify for US tax relief.

The Charities Aid Foundation has a structure on the above lines. See here
https://www.cafonline.org/my-persona...ayer-donations

Your issue is similar and CAF should be able to help.

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Old 17th December 2018, 10:23 PM
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Wow- telepathy in action!

I had just found CAF randomly wandering the internet and wondered if it could be helpful to us. Looks like an 8% fee but perhaps worth it to resolve the issue.

Coincidentally, i also discovered that the Parish has its banking with CAF so i guess recognition wouldn't be an issue.

Will let you know how it all works out (once we eventually get there).

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Old 10th July 2019, 10:11 AM
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We're getting closer, albeit at a glacial pace.

US Trust has agreed for CAF America to be a beneficiary; dissolution of the Trust went to court in May, approved, now in waiting period and CAF have sent me the Gift Form to complete for distribution to my Parish in Wales. What a lot of fingers have been in this pie.

I cannot thank you all enough for your help thus far. It can feel very lonely trying to navigate something which you know nothing about.

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