881 / Are charitable lead annuity trusts treated differently than other types of trusts for GST tax purposes?

With respect to property transferred after October 13, 1987, the GST tax exemption inclusion ratio for any charitable lead annuity trust (see Q 8104) is to be determined by dividing the amount of exemption allocated to the trust by the value of the property in the trust following the charitable term. For this purpose, the exemption allocated to the trust is increased by interest determined at the interest rate used in determining the amount of the estate or gift tax charitable deduction with respect to such a trust over the charitable term. With respect to a late allocation of the GST exemption (see Q 880), interest accrues only from the date of the late allocation. The amount of GST exemption allocated to the trust is not reduced even though it is determined at a later time that a lesser amount of GST exemption would have produced a zero inclusion ratio.¹

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1.    IRC § 2642(e), Treas. Reg. § 26.2642-3.

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