STEP Charitable Planning & Philanthropy

Question 1

In a Charitable Remainder Trust (CRT), what happens to the trust assets at the end of the trust term?

Accepted Answer

The remaining assets pass to the designated charitable beneficiary

Answer

Assets pass to the income beneficiary's estate

Answer

Assets are liquidated and distributed equally among all beneficiaries

Answer

Assets revert to the original grantor

Question 2

What distinguishes a Charitable Remainder Annuity Trust (CRAT) from a Charitable Remainder Unitrust (CRUT)?

Accepted Answer

A CRAT pays a fixed dollar amount annually, while a CRUT pays a fixed percentage of trust assets valued each year

Answer

A CRAT pays a fixed percentage of trust assets annually, while a CRUT pays a fixed dollar amount

Answer

A CRAT benefits multiple charities, while a CRUT can benefit only one

Answer

A CRAT is irrevocable, while a CRUT can be revoked by the grantor

Question 3

What is the primary planning advantage of a Donor-Advised Fund (DAF) compared to making direct charitable gifts each year?

Accepted Answer

The donor receives an immediate income tax deduction and can recommend grant distributions to charities over time

Answer

The donor retains legal ownership and control of donated assets

Answer

DAF contributions are permanently exempt from all federal taxes

Answer

DAFs provide the donor with a lifetime income stream

Question 4

For a private foundation, which of the following counts as a 'qualifying distribution' toward the mandatory 5% annual payout requirement?

Accepted Answer

Grants to public charities and reasonable operating expenses for charitable purposes

Answer

Contributions to a donor-advised fund held by a community foundation

Answer

Federal excise taxes paid on investment income

Answer

Investment management fees paid to manage foundation assets

Question 5

Under IRC Section 4941, which of the following is a recognized exception to the self-dealing rules for private foundations?

Accepted Answer

Paying reasonable compensation to a disqualified person for necessary personal services rendered to the foundation

Answer

Selling investment property to a substantial contributor at fair market value

Answer

Lending foundation funds to a disqualified person without interest

Answer

Renting office space from a foundation board member at below-market rates

Question 6

Under current federal tax law, what is the adjusted gross income (AGI) limitation for cash contributions to public charities?

Accepted Answer

60% of AGI

Answer

30% of AGI

Answer

50% of AGI

Answer

100% of AGI

Question 7

A Charitable Gift Annuity (CGA) is best described as:

Accepted Answer

A contract in which a donor transfers assets irrevocably to a charity in exchange for fixed periodic payments for life, with the residual benefiting the charity

Answer

A government-backed annuity product where payments are guaranteed by a federal agency

Answer

A pooled trust vehicle that distributes income to multiple charities on a pro-rata basis

Answer

A revocable agreement that allows the donor to reclaim donated assets within three years