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Charitable Planning and Philanthropy Flashcards

7 cards from real CTFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. What is the primary characteristic of a Charitable Remainder Trust (CRT)?

    Answer: It provides income payments to non-charitable beneficiaries for a term, with the remainder passing to charity

    A CRT pays income to one or more non-charitable beneficiaries for a specified term, after which the remaining trust assets pass to a qualified charity.

  2. Which type of Charitable Remainder Trust pays a fixed percentage of the trust's fair market value, revalued annually?

    Answer: Charitable Remainder Unitrust (CRUT)

    A CRUT pays a fixed percentage (minimum 5%) of the trust's net fair market value as revalued each year, so payment amounts fluctuate with investment performance.

  3. What is the minimum payout rate required for a qualified Charitable Remainder Trust under IRC Section 664?

    Answer: 5% of either the initial net FMV (CRAT) or the annually revalued FMV (CRUT)

    IRC Section 664 requires CRTs to distribute at least 5% of the applicable trust value annually — the initial net FMV for CRATs and the annually revalued FMV for CRUTs.

  4. How does a Charitable Lead Trust (CLT) differ structurally from a Charitable Remainder Trust (CRT)?

    Answer: In a CLT, charity receives income payments first and the remainder passes to heirs or back to the donor

    A CLT is the structural inverse of a CRT — the charitable interest is the 'lead' income stream paid first to charity, with the remainder ultimately passing to non-charitable beneficiaries.

  5. Which charitable giving vehicle allows donors to make an irrevocable contribution to a sponsoring organization and recommend grants to charities over time?

    Answer: Donor Advised Fund (DAF)

    A DAF allows donors to make an irrevocable, tax-deductible contribution to a sponsoring organization and then recommend (not legally direct) grants to qualified charities over time.

  6. Under IRC Section 170, which requirement must an organization meet to be a qualified recipient of tax-deductible charitable contributions?

    Answer: The organization must be exempt under IRC Section 501(c)(3) with no private inurement to shareholders

    IRC Section 170 requires donee organizations to be exempt under Section 501(c)(3), organized and operated exclusively for charitable purposes, with no private inurement to any individual.

  7. After initial funding, which type of Charitable Remainder Trust permits additional contributions?

    Answer: Charitable Remainder Unitrust (CRUT) only

    Only a CRUT may receive additional contributions after initial funding; a CRAT is prohibited from accepting additional assets because the annuity amount is fixed at the time of creation.