A client of ours has a charitable remainder trust (CRUT) set up. What he has been doing every year, is receive the distribution from his IRA account (which is marked taxable on the 1099-R), and put it into the charitable remainder trust. Since it's going to charity, he is not treating it as a taxable IRA distribution. Is this correct?

ANSWER

The BIDaWIZ Team's Answer:

Generally speaking, the IRA distribution is taxable as the tax law does not provide a means for directly (or indirectly) transferring into a charitable trust during their lifetime. CRUTs are ineligible for qualified charitable distribution (QCD) under the American Taxpayer Relief Act if that is what the client is referencing.

If this same client were to have the proceeds of the IRA distributed to the CRUT at death, that would be different. We believe this is likely a taxable event based on the information you've provided.

References: IRC Section 170(b)(1)(A); IRS Publication 526
State: New York