The American Red Cross, through its National Headquarters, agrees to serve as trustee of a planned gift as long as the terms and conditions outlined in these policies are met. Chapters, blood regions or other operating units of the organization are not authorized to serve as trustee. The decision to accept the trusteeship or successor trusteeship of a planned gift shall be subject to the approval of the Trust Oversight Committee (made up of members from the American Red Cross Office of General Counsel, Treasury, and Development.) Exceptions to these policies will be made only with the prior approval of the Trust Oversight Committee upon adequate showing that the interests of the American Red Cross are served. The American Red Cross may hire a third-party vendor to provide the administration and investment of the trusts. In all cases where the American Red Cross agrees to serve as trustee of a charitable trust, the donor will be required to seek the advice and counsel of his/her own professional advisors. Donors will also be required to have their advisors review and prepare trust materials.
Charitable remainder trusts shall have an expected net present value equal to at least 50% of the initial funding amount of the trust. The Trust Oversight Committee will review each trust to determine if the criterion is met. The chart below recommends the maximum trust payout rates in order to produce expected net present values equal to at least 50% of initial funding amount.
One-life (Age) 47 53 58 64 71 78 >88
Two Lives (Age) 54 59 64 70 76 83 >93
CRUT –– 5.0% 5.5% 7.0% 8.0% n/a n/a
CRAT 6.5% 6.5% 6.5% 7.0% 7.5% 8.0% 10.0%
Trustee for gifts of cash and marketable securities:
The American Red Cross may agree to serve as trustee at the request of the donor if:
(a) the contribution of cash or marketable securities to the trust is of appropriate value, usually a minimum of $150,000; and
(b) the trust provides for an irrevocable remainder interest to the American Red Cross of 100%. OR
(a) the contribution of cash or marketable securities to the trust is of appropriate value, usually a minimum of $250,000; and
(b) the trust provides for an irrevocable remainder interest to the American Red Cross of at least 50%.
Trustee for gifts of real estate:
Real estate may be used to fund a charitable trust if:
(a)the contribution of real estate is of appropriate value, usually a minimum of $250,000; and
(b)Donors agree to serve initially as their own trustee. The American Red Cross will then be named the successor trustee of the trust once the property has been sold; and
(c)Acceptance of the successor trusteeship will be subject to the review of the Trust Oversight Committee.
Where the American Red Cross is to serve as trustee, it shall not enter into any oral or written agreement with the donor with respect to any restrictions in the timing of the sale of the assets contributed to a charitable remainder trust or to the American Red Cross.
With the Trust Oversight Committee’s approval, the American Red Cross may agree to serve as an agent for asset management and trust administration purposes for a charitable remainder trust for which it is not the initial trustee.
IRS Rules
In determining whether the ages of the charitable remainder trust beneficiaries will impact the acceptability of the American Red Cross to serve as trustee, the IRS rules for determining whether a trust shall qualify for a charitable remainder annuity trust or charitable remainder unitrust shall be controlling. Under such rules:
(a) the trust may not have a fixed rate payout greater than 50% percent;
(b) may not have a present value of the remainder interest at the date of contribution less than ten percent of the value of the contribution; and
(c) may not have a probability greater than 5% percent at the date of the contribution that it will be exhausted of value before the end of its term.
The American Red Cross shall ascertain that none of these tests shall be subject to failure before agreeing to serve as trustee.
Payment of Annuity or Unitrust Amounts
Payment of annuity amount: Must be at least 5% of initial value of trust assets. Must be paid either for a term of years (not more than 20) or for the life or lives of one or more beneficiaries.
Payment of the unitrust amount: Must be expressed as a fixed percentage (at least 5%) of the value of trust assets determined annually. Trust instrument may provide for payment of all net income for a year if such income is less than amount determined in the fixed percentage. Trust provision may also provide for payment of “catch-up” amounts. Must be paid either for a term of years (not more than 20) or for the life or lives of one or more beneficiaries.
FLIP provision
The preferred arrangement to be used when an illiquid or non-income producing asset, (real estate) is contributed to a charitable remainder trust is a net income unitrust with a “flip” provision. This provision will cause the trust to become a standard unitrust in the year after the assets are sold.
Additional Contributions
Annuity trusts must prohibit any contribution after initial contribution.
Unitrusts may allow additional contributions, but must contain specific provisions concerning computation of unitrust amount for the year in which additional contribution is made.
Frequency of Payments
Payments to beneficiaries may be made annually, semi-annually, quarterly. Monthly payments are allowed, but not encouraged.
Costs of Establishing, Administering and Investing a CRT
American Red Cross reserved the right to charge each charitable remainder trust a fee to cover the costs of investment management and administration. Fees for asset management and trust administration services will be charged to the trusts. Although the fee may change with prevailing costs, the current fee schedule is as follows:
Trust administration fee: .275% of the trust assets annually (valued and billed quarterly)
Investment administration fee: .59% of the trust market value annually (valued and billed quarterly). Other lower fees may apply depending on the investment management.
Tax Forms
Beneficiaries will receive a K-1 tax form by the IRS required deadline. The Trustee will prepare a tax trust return (generally Form 1041-A) each year.
Investment of the Trust Assets
All trust investment management is handled by a discretionary investment counsel, subject to oversight by the Trust Oversight Committee. The following chart details the seven preferred investment choices. Any exceptions to these investment policies must be approved by the American Red Cross Treasury Management department.
See EXHIBIT B.
Charitable Deduction
A donor who creates a charitable remainder trust is deemed to make a gift to the American Red Cross equal in amount to the fair market value of the remainder interest. The deduction is subject to the percentage limitations, which apply to lifetime gifts. (For gifts of cash, a donor may deduct up to 50% of his adjusted gross income in the year of the gift and carry over the excess for five years. For gifts of appreciated securities, a donor may deduct up to 30% of his adjusted gross income in the year of the gift and carry over the excess for five years.)
To determine the charitable deduction, the donor may choose any of three federal midterm interest rates (the discount rate): the rate of the month of the gift or the rate for either of the two months proceeding the month of the gift. In the case of charitable remainder trusts, the higher the discount rate, the larger the deduction. If the donor chooses a discount rate other than the month of the gift, the donor must complete the discount rate election form.
Designation
The donor may designate a chapter, a blood region, the National Headquarters, or a combination of chapter, blood region and National Headquarters, as the charitable beneficiary. The donor may not change the designation once the trust document has been executed.
Signature and Approval Authority
The Chief Development Officer delegates signature and approval authority to the National Headquarters Vice President of Development and National Headquarters Director of Gift Planning. Documentation of delegation must be retained by the Gift Planning unit to facilitate any subsequent auditing requirements. The charitable remainder trusts and charitable lead trusts will be signed on behalf of the American Red Cross by the National Headquarters Director of Gift Planning (all supervisors above the level of National Headquarters Director of Gift Planning also have signature authority.)
