An Idaho charitable trust lets you support the causes you care about while meeting financial goals of your own: converting a highly appreciated farm, rental property or stock position into lifetime income without an immediate capital gains hit, or passing assets to children at a reduced gift or estate tax cost. Because Idaho has no state estate or inheritance tax, Idaho charitable planning is driven mainly by federal income, gift and estate tax rules, with Idaho law governing how the trust is administered and supervised. Holmes Law, the practice of Michael Holmes, drafts Idaho charitable remainder and charitable lead trusts remotely and coordinates them with the rest of a client’s estate plan.
This page covers the main types of Idaho charitable trusts, the federal requirements that make them work, the Idaho statutes that apply to charitable and split-interest trusts, the Idaho Attorney General’s oversight role, and how to decide whether a charitable trust is a better fit than a simpler gift. For the general framework of Idaho trust law, see the Idaho trusts hub.
Why Consider an Idaho Charitable Trust
Idaho families often hold assets that have appreciated enormously: farmland and ranch ground, Treasure Valley real estate bought decades ago, or a concentrated stock position in a single company. Selling those assets outright triggers capital gains tax. A charitable remainder trust can sell the asset without paying capital gains tax at the trust level, reinvest the full proceeds, and pay the donor an income stream for life or a term of years, with the remainder going to charity. The donor also receives an income tax deduction for the present value of the charity’s remainder interest.
Other clients use charitable trusts in the opposite direction, paying charity first and passing the remainder to family at a reduced transfer tax cost. In either case, the trust should be driven by genuine charitable intent. The tax benefits are real, but they rarely make a charitable gift a net financial gain compared with keeping the asset.
Charitable Remainder Trusts Under IRC § 664
A charitable remainder trust, or CRT, pays an annual amount to one or more noncharitable beneficiaries, usually the donor or the donor and spouse, and then distributes what remains to charity. Internal Revenue Code § 664 imposes strict requirements:
- Payout. The annual payout must be at least 5% and no more than 50% of the trust’s value.
- Minimum remainder. The value of the charitable remainder, calculated at funding, must be at least 10% of the initial fair market value of the property transferred.
- Term. Payments may last for the life or lives of individual beneficiaries, or for a term of no more than 20 years.
- Tax-exempt status. The trust itself is generally exempt from income tax, which is what allows it to sell appreciated property without paying the capital gains tax immediately. Distributions to the income beneficiary carry out income under a tiered system.
Charitable Remainder Annuity Trusts
A charitable remainder annuity trust, or CRAT, pays a fixed dollar amount each year, set at funding. It suits donors who want predictable income. No additional contributions can be made after the initial funding.
Charitable Remainder Unitrusts
A charitable remainder unitrust, or CRUT, pays a fixed percentage of the trust’s value, revalued each year. Payments rise and fall with the trust’s investments, and additional contributions are allowed.
Flip CRUTs for Real Estate and Illiquid Assets
A flip unitrust starts as a net-income unitrust, paying only the lesser of trust income or the unitrust amount, and then “flips” to a standard unitrust after a triggering event such as the sale of the contributed property. Flip CRUTs are well suited to Idaho farmland, ranch property and other real estate that produces little income and may take time to sell.
Charitable Lead Trusts
A charitable lead trust reverses the order: charity receives payments first, for a term of years or for life, and the remainder then passes to family or other noncharitable beneficiaries.
- CLAT. A charitable lead annuity trust pays charity a fixed annuity. When structured so that the present value of the charity’s interest is close to the amount contributed, the taxable gift of the remainder can be very small, and any growth above the IRS assumed rate passes to family free of gift tax.
- CLUT. A charitable lead unitrust pays charity a fixed percentage of the trust’s value each year.
A lead trust can be a grantor trust, giving the donor an upfront income tax deduction but taxing trust income to the donor, or a non-grantor trust, in which the trust pays its own tax and claims a charitable deduction for the amounts paid to charity. Testamentary lead trusts created at death can produce a federal estate tax charitable deduction under Internal Revenue Code § 2055 for the value of the charity’s interest.
Idaho Law Governing Charitable and Split-Interest Trusts
Federal law determines whether a charitable trust qualifies for tax benefits. Idaho law governs its validity, administration and oversight.
Idaho Code Title 68, Chapter 12
Idaho Code §§ 68-1201 to 68-1207 apply to private foundations, charitable trusts described in Internal Revenue Code § 4947(a)(1), and split-interest trusts described in § 4947(a)(2), which includes charitable remainder and lead trusts. Section 68-1202 treats each such trust as though its instrument prohibits self-dealing, excess business holdings, jeopardizing investments and taxable expenditures that would trigger federal private foundation excise taxes, to the extent those rules apply to split-interest trusts. For private foundations and wholly charitable trusts, § 68-1203 deems in a required-distribution provision.
Section 68-1204 lets a trustee, with the prior consent of the Idaho Attorney General, amend a charitable trust’s governing instrument to conform to the federal tax exemption requirements, to terminate private foundation status, or to terminate a trust that has become impractical because of its small size or changed circumstances and transfer its assets to § 501(c)(3) organizations. Where there are charitable or residual beneficiaries, their consent is also required.
The Idaho Charitable Assets Protection Act
In 2020 Idaho enacted the Idaho Charitable Assets Protection Act, Idaho Code § 48-1901 and following. It defines a charitable organization as any person holding charitable assets, regardless of legal form, which includes the trustee of a charitable trust. It makes certain misuses of charitable assets unlawful, requires a charitable organization that holds or has held more than $10,000 in charitable assets to give the Attorney General written notice before it dissolves, terminates or disposes of all of its charitable assets (§ 48-1907), and gives the Attorney General investigative and enforcement authority, including the power to pursue restitution and to ask a court to redirect recovered assets to a charity with a similar purpose through cy pres (§ 48-1914).
The Act’s definition of charitable asset excludes private assets held in a split-interest trust described in § 4947(a)(2). In a charitable remainder trust, the donor’s income interest is not a charitable asset under the Act, while the charitable remainder is. When a charitable trust terminates and distributes its charitable assets, the trustee should consider whether the § 48-1907 notice requirement applies; notice given under § 68-1204 satisfies it for amendments and terminations handled under that section.
The Attorney General’s Role
Idaho Code § 67-1401(5) directs the Attorney General to supervise charitable organizations as defined in the Act and to enforce against departures from charitable purpose. In practice, trustees of Idaho charitable trusts should expect the Attorney General to be a necessary party to proceedings that affect charitable interests, and should factor that into any plan to modify or terminate a trust.
Perpetuities and Charitable Transfers
Idaho’s limited rule against suspension of the power of alienation, § 55-111A, expressly does not limit transfers in trust for charitable purposes or to charitable entities. A charitable trust can therefore be designed to last as long as its purpose requires.
Fixing Drafting Problems
Charitable remainder trusts are unforgiving of drafting errors. Idaho’s TEDRA defines the matters it can resolve to include amending or reforming a trust to qualify for the federal charitable deduction, including adding the mandatory governing instrument provisions for a charitable remainder trust (§ 15-8-103(1)(e)). That gives Idaho families a nonjudicial or judicial path to correct a defective instrument, subject to any consents required by § 68-1204.
Community Property and Idaho Charitable Trusts
Many Idaho donors are married and fund charitable trusts with community property. A joint-life CRT that pays both spouses for their lives and then the survivor is a common design. The trust should document the community character of contributed property, and both spouses should sign, since each owns half. If a CRT is funded with one spouse’s separate property but names the other spouse as a successor income beneficiary, the gift to the spouse must be structured to qualify for the marital deduction. For an Idaho couple holding highly appreciated community property, it is also worth comparing a CRT with simply holding the asset until the first death, when both halves generally receive a new income tax basis under Internal Revenue Code § 1014(b)(6).
Alternatives to an Idaho Charitable Trust
A charitable trust is not always the right vehicle. Depending on your goals, other options may be simpler:
- Outright gifts of appreciated stock, which avoid capital gains and produce an income tax deduction without a trust.
- Donor-advised funds, which allow an immediate deduction with grants made over time, and which require no trustee or separate tax return.
- Charitable beneficiary designations on an IRA, often the most tax-efficient charitable bequest because charity pays no income tax on the account.
- Private foundations, for families wanting long-term control and involvement, subject to the federal private foundation rules and Idaho’s Title 68, Chapter 12.
- Charitable gift annuities, offered by many charities, which provide lifetime income with less administration than a CRT.
Choosing the Charitable Beneficiary and Trustee
A charitable trust should name the charitable remainder or lead beneficiary carefully. Donors can name specific organizations, reserve the right to change charities, or direct the remainder to a donor-advised fund or a family foundation. Naming a specific charity without a backup risks a problem if the organization merges or dissolves, and Idaho’s Attorney General may become involved if the court must redirect the gift. A well-drafted trust names alternates and provides that any successor must be a qualified charitable organization under the Internal Revenue Code.
The donor can serve as trustee of a charitable remainder trust in many cases, although Treasury regulations require that hard-to-value assets such as real estate or closely held business interests be valued by an independent trustee or by a qualified appraisal. Many Idaho donors appoint a co-trustee or a corporate trustee to handle investments and annual reporting, including the federal split-interest trust return. Idaho’s directed trust statute, § 15-7-501, allows the trust to appoint an investment trust advisor to direct the trustee on investments, which is useful when the trust holds a family business or farm ground.
Funding an Idaho Charitable Remainder Trust With Real Estate
Real estate is one of the most common CRT assets for Idaho families, and one of the most technically demanding. The property must be transferred to the trust before any binding sale agreement is signed; otherwise the IRS may treat the donor as having sold the property and owe tax on the gain. Mortgaged property can generate unrelated business taxable income, which is subject to a 100% excise tax in a charitable remainder trust, and can raise other qualification problems, so debt is usually paid off first. A qualified appraisal is required to support the income tax deduction. Holmes Law coordinates the deed, the appraisal and timing with the donor’s tax advisor and real estate professionals so these steps happen in the right order.
Frequently Asked Questions
Does Idaho have its own charitable trust statute?
Idaho has several. Title 68, Chapter 12 applies federal private foundation restrictions to charitable and split-interest trusts and allows amendments with Attorney General consent, and the Idaho Charitable Assets Protection Act (§ 48-1901 and following) governs misuse of charitable assets and the Attorney General’s enforcement powers.
What is the minimum payout for a charitable remainder trust?
At least 5% and no more than 50% annually, with the charitable remainder worth at least 10% of the initial contribution, under Internal Revenue Code § 664.
Can I put Idaho farmland or rental property into a charitable remainder trust?
Yes. Real estate is common, often using a flip unitrust so that payments start once the property is sold. Mortgaged property and property with environmental issues require special care.
Does Idaho tax charitable remainder trusts?
A qualifying charitable remainder trust is generally exempt from federal income tax. Idaho income tax treatment should be reviewed for the specific trust and beneficiaries, and income beneficiaries report distributions on their own returns.
Can a charitable trust be changed after it is signed?
Limited changes are possible. Section 68-1204 permits amendments with Attorney General consent for specific purposes, and TEDRA can be used to reform a trust to meet federal requirements. The core charitable terms generally cannot be changed.
Is the Idaho Attorney General involved in my charitable trust?
The Attorney General supervises charitable assets and can investigate misuse. Routine administration does not require the Attorney General’s involvement, but amendments under § 68-1204 and court proceedings affecting charitable interests typically do.
Speak With an Idaho Charitable Trust Attorney
Holmes Law drafts Idaho charitable remainder and charitable lead trusts and coordinates them with wills, revocable trusts and beneficiary designations, all remotely. Michael Holmes is admitted in Idaho and works with your financial and tax advisors on valuation and funding. To discuss a charitable trust, contact Holmes Law about an Idaho charitable trust, or read more on the Idaho estate planning page and the Idaho irrevocable trusts page.