- 19 -
sufficient if a trustee chooses to manage a trust so that the
payouts to noncharitable beneficiaries conform to the
requirements of a CRUT, even where the governing instrument does
not require this result, conflicts with the explicit terms of
both the 1969 Act rules, sec. 2055(e)(2), and the reformation
provisions of section 2055(e)(3). Section 2055(e)(2) provides
that "no deduction shall be allowed" for the charitable remainder
interest in a split-interest trust "unless * * * such interest is
in a trust which is a charitable remainder annuity trust or a
charitable remainder unitrust (described in section 664) or a
pooled income fund (described in section 642(c)(5))".
Reformation under section 2055(e)(3) is not available unless the
governing instrument contains specified terms, sec.
2055(e)(3)(C)(ii), or is promptly amended, sec.
2055(e)(3)(C)(iii). Thus, in both the "substantive" deduction
requirements of section 2055(e)(2) and the reformation provisions
of section 2055(e)(3), the terms of the governing instrument are
paramount. As the legislative history explains, the requirement
in section 2055(e)(2) that certain trust forms be used was
designed in large part to eliminate a trustee's discretion, which
might be used to favor noncharitable income beneficiaries. See
Estate of Gillespie v. Commissioner, supra at 376-377; H. Rept.
91-413 (Part 1), supra at 58-60, 1969-3 C.B. at 237-238; S. Rept.
91-552, supra at 86-87, 1969-3 C.B. at 479. The fact that the
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011