rp-05-24.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR § 601.105: Examination of returns and claims for refund, credit, or
abatement; determination of correct tax liability.
(Also Part I, §§ 664; 1.664-1, 1.664-2, 1.664-3.)

Rev. Proc. 2005-24

SECTION 1. PURPOSE AND SCOPE
.01 This revenue procedure applies to any charitable remainder annuity
trust (CRAT) or charitable remainder unitrust (CRUT) that is created by the
grantor, G, if, under applicable state law, G’s surviving spouse, S, has a right
of election exercisable on G’s death to receive an elective, statutory share of
G’s estate, and such share could be satisfied in whole or in part from assets of
the CRAT or CRUT in violation of § 664(d)(1)(B) or (d)(2)(B) of the Internal
Revenue Code. In general, only inter vivos CRATs or CRUTs are within the
scope of this revenue procedure.
.02 This revenue procedure provides a safe harbor procedure under
which the Internal Revenue Service will disregard the right of election for
purposes of determining whether the CRAT or CRUT meets the requirements
of § 664(d)(1)(B) or (d)(2)(B) continuously since its creation if S irrevocably
waives the right of election in the manner prescribed in this revenue

procedure. For trusts created before June 28, 2005, the Service will disregard
the right of election, even without a waiver, but only if S does not exercise the
right of election.
.03 The safe harbor procedure provided by this revenue procedure is
not available to a CRAT or CRUT if S exercises the right of election.
SECTION 2. BACKGROUND
.01 In general, a testator is free to dispose of property in accordance
with the testator’s own wishes. However, in most jurisdictions, state statutes
protect S from disinheritance. In most common law jurisdictions, these
statutes are in the form of elective share provisions, many of which are based
on the elective share provisions of the Uniform Probate Code (UPC), §§ 2-
201- 2-214 (amended 1993). Elective share statutes provide S the right to
elect to receive a statutory share of G’s estate, regardless of whether G made
any bequests to S. For purposes of this revenue procedure, S’s statutory
share of G’s estate will be referred to as an “elective share” and the right to
elect to receive an elective share will be referred to as a “right of election”,
regardless of what terms different jurisdictions may use to describe these
concepts.
.02 In some states, the elective share is based solely on the probate
estate but, in others, G’s estate is defined more broadly for purposes of
computing the elective share and may include assets of the CRAT or CRUT.
In states that have adopted the elective share provisions of the UPC, S has
the right of election to take a percentage (generally determined by the duration

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of the marriage, but subject to a minimum dollar amount in some cases) of the
“augmented estate” provided that certain requirements are met. UPC § 2-202.
The augmented estate includes G’s net probate estate, as well as certain
nonprobate assets of G, certain property transferred by G to others (including
to S) during life, and certain other property. UPC §§ 2-202 and 2-207. The
assets of the CRAT or CRUT may be included in the augmented estate and,
therefore, may be used to determine and satisfy the elective share amount.
UPC § 2-209. In some states, the CRAT or CRUT assets may be used to
satisfy the elective share only after other property in the augmented estate first
has been exhausted.
.03 Sections 664(d)(1)(B) (in the case of a CRAT) and (d)(2)(B) (in the
case of a CRUT) provide that no amount other than the annuity payments
described in § 664(d)(1)(A) or the unitrust payments described in §
664(d)(2)(A), respectively, (other than qualified gratuitous payments described
in §§ 664(d)(1)(C) and (d)(2)(C)) may be paid to or for the use of any person
other than an organization described in § 170(c). The requirements of §§
664(d)(1)(B) and (d)(2)(B) are not satisfied in situations in which S may
exercise the right of election to receive an elective share and the share could
include assets of the CRAT or CRUT, because the mere existence of the right
of election under applicable law, whether or not exercised, and the resulting
possibility that the CRAT or CRUT may be invaded for the benefit of S ,
causes the trust to fail to qualify under § 664(d).
.04 The Service believes that, in the interest of sound tax

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administration and to reduce the burden on taxpayers, it is appropriate to
provide a safe harbor procedure that, if followed, will cause the right of election
to be disregarded for purposes of determining whether a CRAT or CRUT that
is within the scope of this revenue procedure meets the requirements of §
664(d) continuously from the date the trust is created. This procedure
generally requires that S irrevocably waive the right of election with regard to
the assets of the CRAT or CRUT to ensure that no part of the trust will be used
to satisfy the elective share.
.05 No waiver of the right of election is required if the applicable state
law does not provide S with a right of election, exercisable at the time of G’s
death, to receive an elective share of G’s estate. For example, in community
property jurisdictions, elective share provisions are generally unnecessary
because S typically has vested ownership in one-half of the community
property. Additionally, no waiver is required if, under applicable state law, S’s
elective share of G’s estate may not include any assets of the CRAT or CRUT
(other than the annuity or unitrust interest payable to S as the named
recipient). For example, no waiver is required if, under applicable state law,
the trust’s property is excluded from the base for computing the elective share
by reason of G’s receipt of adequate and full consideration for the transfer or
the written consent to or joinder in the transfer by S and, in fact, the
consideration is paid or the consent or joinder is given.
SECTION 3. APPLICATION OF SAFE HARBOR
.01 In General. With respect to any CRAT or CRUT within the scope of

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this revenue procedure, S’s right of election to receive an elective share of G’s
estate, if the share could include any assets of a CRAT or CRUT created or
funded by G, will be disregarded for purposes of determining whether the
CRAT or CRUT has met the requirements of § 664(d)(1)(B) or (d)(2)(B)
continuously since its creation if all of the requirements of section 3 of this
revenue procedure are satisfied. For CRATs and CRUTs within the scope of
this revenue procedure created by G on or after June 28, 2005, the failure of S
to waive the right of election in accordance with the requirements of this
revenue procedure will result in the CRAT or CRUT failing to qualify under §
664(d) continuously since its creation, whether or not S exercises the right of
election. For CRATs and CRUTs within the scope of this revenue procedure
created by G before June 28, 2005, the failure of S to waive the right of
election, combined with S’s exercise of that right of election, will result in the
CRAT or CRUT failing to qualify under § 664(d) continuously since its creation.
Thus, for all CRATs and CRUTs, regardless of when they were created, a
waiver under this revenue procedure of S’s right of election will provide
certainty that the right of election will not cause the trust to fail to qualify under
§ 664(d) continuously since its creation.
.02 Waiver Effective Under State Law. S must irrevocably waive the
right of election to whatever extent necessary to ensure that no part of the trust
(other than the annuity or unitrust interest of which S is the named recipient
under the terms of the trust) may be used to satisfy the elective share. A valid
waiver of the elective share or right of election will satisfy the requirements of

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the preceding sentence if the waiver is valid under applicable state law, in
writing, and signed and dated by S. This revenue procedure does not require
a waiver of S’s right as the named recipient to receive the annuity or unitrust
payment from the CRAT or CRUT.
.03 Timing of Waiver. For CRATs or CRUTs created by G on or after
June 28, 2005, section 3.02 of this revenue procedure must be satisfied on or
before the date that is 6 months after the due date (excluding extensions of
time to file actually granted) of Form 5227, Split-Interest Trust Information
Return, for the year in which the later of the following occurs:
(1) the creation of the trust;
(2) the date of G
’s marriage to S;
(3) the date G first becomes domiciled or resident in a jurisdiction
whose law provides a right of election that could be satisfied from
assets of the trust; or
(4) the effective date of applicable state law creating a right of
election.
.04 Trustee To Retain Copy. A copy of the signed waiver must be
provided to the trustee of the CRAT or CRUT. The trustee must retain the
copy in the official records of the trust so long as the contents thereof may
become material in the administration of any internal revenue law. See §
1.6001-1(e) of the Income Tax Regulations.
SECTION 4. EXAMPLES
In each of the following examples, G created a CRAT that provides an

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annuity to G for G’s life. Upon G’s death, the remainder of the trust will pass to
an organization that meets the requirements of § 170(c). In each example
(except Example 3), at the time the CRAT is created, applicable state law
provides S a right of election to receive an elective share of G’s estate and the
share would include (and could be satisfied from) assets of the trust.
.01 Example 1. G creates the trust in 2007 while married to S. On or
before the date that is 6 months after the due date (excluding extensions of
time to file actually granted) of the Form 5227 for the trust for calendar year
2007, S irrevocably waives S’s right of election to receive an elective share
with regard to the assets in the trust (but does not waive the right of election
with regard to G’s probate estate).
.02 Example 2. G creates the trust in 2006, and is unmarried on the
date the trust is created. On May 1, 2007, G marries S. On or before the date
that is 6 months after the due date (excluding extensions of time to file actually
granted) of the Form 5227 for the trust for calendar year 2007, S irrevocably
waives the right of election to receive an elective share with regard to the
assets in the trust (but does not waive the right of election with regard to G’s
probate estate).
.03 Example 3. G creates the trust in 2008 while married to S. Under
applicable state law in effect on the date that G creates the trust, the elective
share does not include the assets in the trust. Effective on March 1, 2009,
applicable state law is amended to give S the right of election to receive an
elective share of the “augmented estate,” which, by definition, includes the

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assets of the trust. On or before the date that is 6 months after the due date
(excluding extensions of time to file actually granted) of the Form 5227 for the
trust for calendar year 2009, S irrevocably waives the right of election to
receive an elective share with regard to the assets in the trust (but does not
waive the right of election with regard to G’s probate estate).
In each of Examples 1 through 3, assuming that S’s timely waiver of the
right of election is valid under applicable state law and satisfies the other
requirements of this revenue procedure, the existence of the right of election
will be disregarded for the purpose of determining whether the trust has
qualified continuously since its creation as a CRAT under § 664(d)(1)(B).
Further, in each of Examples 1 through 3, the result would be the same if,
instead of executing only a partial waiver, S had waived the full right of election
with respect to all assets in G’s augmented estate.
.04 Example 4. G creates the trust in 2007 while married to S. Under
applicable state law in effect on the date that G creates the trust, the elective
share includes the assets in the trust. Later in the same year, applicable state
law is amended to provide that the augmented estate does not include the
assets of a CRAT or CRUT and the amendment applies retroactively to
include the trust created by G. Accordingly, no waiver of the right of election is
required with respect to the assets of the trust in order for the trust to continue
to qualify as a CRAT.
.05 Example 5. The facts are the same as in Example 2 except that the
waiver is contained in, or is signed pursuant to the requirements of, a

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prenuptial agreement. Unless the agreement as a whole (or only the waiver)
is subsequently found to be invalid or unenforceable, the waiver will satisfy the
requirements of this revenue procedure.
.06 Example 6. The facts are the same as in Example 1, except that S
dies in 2010. In 2012, G marries S2. S2 refuses to waive S2's right to receive
an elective share with regard to the assets in the trust. The existence of S's
right of election will be disregarded for the purpose of determining whether the
trust has qualified continuously since its creation up until G’s marriage to S2,
as a CRAT under § 664(d)(1)(B). However, because S2 did not timely and
irrevocably waive S2's right to receive an elective share with regard to the
assets in the trust, the trust does not qualify as a CRAT under § 664(d)(1)(B).
If, in these examples, G had instead created a CRUT, the results would
be the same for purposes of § 664(d)(2)(B).
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective as of March 30, 2005.
SECTION 6. PAPERWORK REDUCTION ACT
The collection of information contained in this revenue procedure has
been reviewed and approved by the Office of Management and Budget in
accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control
number 1545-1936.
An agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection of information
displays a valid OMB control number.

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The collection of information in this revenue procedure is in section 3.
This information is required to be collected and retained in order to ensure that
a trust meets the requirements of § 664(d)(1) or (d)(2). This information will be
used to determine whether the eligibility requirements under those statutes for
treatment as a CRAT or CRUT have been met. The collection of information is
required to obtain a benefit. The likely respondents are individuals.
The estimated total annual reporting burden is 150,000 hours.
The estimated annual burden per respondent varies from 1 hour to 2
hours, depending on individual circumstances, with an estimated average
burden of 1 1/2 hours to complete the statements required under this revenue
procedure. The estimated number of respondents is 100,000.
The estimated annual frequency of responses is on occasion.
Books or records relating to a collection of information must be retained
as long as their contents may become material in the administration of any
Internal Revenue law. Generally, tax returns and tax return information are
confidential, as required by 26 U.S.C. 6103.
SECTION 7. DRAFTING INFORMATION

The principal author of this revenue procedure is Susan H. Levy. For
further information regarding this revenue procedure contact Susan H. Levy on
(202) 622-3090 (not a toll free call) or Bradford R. Poston on (202) 622-3060
(neither a toll free call).