NIMCRUTNet-Income with Make-Up Charitable Remainder Trust
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The net income of a NIMCRUT is not determined under income tax or financial accounting principles, but rather is calculated under the terms of the trust agreement and applicable local law.
For this reason the NIMCRUT is perhaps the most popular type of charitable remainder trust, since it allows for the deferral of income to later years, much like a deferred-income retirement plan, and still allows the trustee to maximize the payout amount.
The NIMCRUT is more appropriate for donors who have no desire for immediate distributions.
So let's say you start a NIMCRUT at age 45 and deposit substantial sums into the trust every year.
Under the originally proposed regulations, NICRUTs and NIMCRUTs administered in states that define income as a unitrust amount would have been required to contain their own definition of income in the trust document.
A distribution from a NIMCRUT is limited to the trust income, which is determined under the trust terms and applicable local law, according to Sec.
Depending on the definition of trust income contained in the trust document, it is possible for the NIMCRUT to have little or no accounting income for several years.
This ruling has taken the estate planning community somewhat by surprise, because of the Service's recently announced study of the use of investment strategies enabling a NIMCRUT trustee to defer income and control the receipt of distributable income,(54) However, a number of practitioners firmly believe that the legislative history surrounding NIMCRUTs strongly supports (if not mandates) the result reached by the Service in the TAM.
97-23 that it would not issue rulings or determination letters on whether a NIMCRUT failed to function exclusively as a charitable remainder trust when a trustee, among others, could control the timing of the trust's receipt of income through the use of a deferred annuity or a partnership for the benefit of the unitrust recipient.
The details and variations available through the use of NIMCRUTs and recent IRS attacks on these vehicles are beyond the scope of this article.
2702-1 (a)(3)(i) provides that the unitrust interest in a NIMCRUT retained by the donor or any applicable family member will be valued at zero if someone other than the donor and/or the donor's spouse is a noncharitable beneficiary of the trust.
15) However, for NIMCRUTs, any deficits in required distributions accumulate, and the trustee must make up for these deficiencies when trust income permits.