§ 36C-4B-4. Administrative provisions applicable to both charitable remainder annuity trusts and charitable remainder unitrusts. - North Carolina Statutes

§ 36C‑4B‑4. Administrative provisions applicable to both charitable remainder annuitytrusts and charitable remainder unitrusts.

(a)        Creation ofRemainder Interests in Charity. – Upon the termination of the noncharitableinterests, the trustee shall distribute all of the then principal and income ofthe trust, other than any amount due the noncharitable beneficiary orbeneficiaries, to the designated charity or charities, or shall hold theproperty in trust for the designated charity or charities in accordance withthe terms of the trust document.

(b)        Selection ofAlternate Charitable Beneficiary if Remaindermen Do Not Qualify Under Section170(c) of the Internal Revenue Code at Time of Distribution. – If thedesignated charity is not an organization described in section 170(c) of theInternal Revenue Code at the time when any principal or income of the trust isto be distributed to it, the trustee must distribute the principal or income toone or more organizations then described in section 170(c) of the InternalRevenue Code selected in accordance with the terms of the trust instrument. Ifthe trust instrument does not provide for a method of selecting alternatecharitable beneficiaries that are then qualified under section 170(c) of theInternal Revenue Code, the trustee must, in the trustee's sole discretion,select alternate trust beneficiaries that are qualified under section 170(c) ofthe Internal Revenue Code.

(c)        Selection ofAlternative Charitable Beneficiary if Remaindermen Do Not Qualify Under Section170(b)(1)(A) of the Internal Revenue Code at Time of Distribution. –Notwithstanding subsection (b) of this section, if the designated charity is,at the time of the creation of the trust, an organization described in bothsection 170(b)(1)(A) and section 170(c) of the Internal Revenue Code, and ifthe designated charity is not an organization described in both section170(b)(1)(A) and section 170(c) of the Internal Revenue Code when any principalor income of the trust is to be distributed to it, the trustee must distributethe principal or income to one or more organizations then described in bothsection 170(b)(1)(A) and section 170(c) of the Internal Revenue Code selectedin accordance with the terms of the governing instrument; however, in the eventthat the governing instrument does not provide a method of selectingalternative charitable beneficiaries that are then described in both section170(b)(1)(A) and section 170(c) of the Internal Revenue Code, the trusteeshall, in his sole discretion, select one or more alternative charitablebeneficiaries that are described in both section 170(b)(1)(A) and section170(c) of the Internal Revenue Code and must distribute the principal or incometo the organization or organizations so selected in shares as the trustee, inthe trustee's sole discretion, shall determine.

(d)        ProhibitionsGoverning Trustees. – Except for payment of the annuity amount or the unitrustamount to the beneficiaries, whichever is applicable, the trustee is prohibitedfrom engaging in any act of self‑dealing as defined in section 4941(d) ofthe Internal Revenue Code, retaining any excess business holdings as defined insection 4943(c) of the Internal Revenue Code that would subject the trust totax under section 4943 of the Code, making any investments that would subjectthe trust to tax under section 4944 of the Internal Revenue Code, and makingany taxable expenditures as defined in section 4945(d) of the Code. The trusteeshall make distributions at a time and in a manner as not to subject the trustto tax under section 4942 of the Internal Revenue Code.

(e)        Distribution toCharity During Term of Noncharitable Interests and Distributions in Kind. – Ifthe governing instrument of the trust provides for distribution to charityduring the term of the noncharitable interests, the trustee may pay to thedesignated charity the amounts specified in the governing instrument thatexceed the annuity amount or the unitrust amount payable to any of thebeneficiaries for the taxable year of the trust in which the income is earned.If the governing instrument of the trust provides for distribution to charityin kind, the adjusted basis for federal income tax purposes of any trustproperty the trustee distributes in kind to charity during the term of thenoncharitable interests must be fairly representative of the adjusted basis forthose purposes of all trust property available for distribution on the date ofdistribution.

(f)         InvestmentRestrictions on Trustee. – Nothing in the trust instrument shall be construedto restrict the trustee from investing the trust assets in a manner that couldresult in the annual realization of a reasonable amount of income or gain fromthe sale or disposition of trust assets.

(g)        Distribution FromTrust Used to Administer an Estate to Charitable Remainder Trust. – If thegoverning instrument of a revocable inter vivos trust provides that therevocable inter vivos trust will be used partially to administer the estate ofthe settlor or for some other purpose, and further provides the assets willthen be distributed to another trust that is a charitable remainder trust, uponthe death of the settlor, or upon the occurrence of any event that causes thetrust to become irrevocable, then the trust shall become irrevocable, and thetrustee of this trust shall perform any remaining duties or obligationsprovided for in the trust instrument and then transfer the property specifiedin the governing instrument to the trustee of the charitable remainder trust tobe held, administered, and distributed in the manner and according to the termsand conditions provided by the charitable remainder trust.

(h)        Payment of Taxes byNoncharitable Beneficiary. – In the case of any inter vivos charitableremainder trust that is liable to pay, from trust property, any federal estate,state inheritance, or other similar death taxes by reason of the death of thesettlor of the trust, the interest of any noncharitable beneficiary of thetrust shall terminate upon the death of the settlor unless the noncharitablebeneficiary furnishes to the trust sufficient funds for payment of all thosetaxes attributable to the interest of the noncharitable beneficiary in thetrust property, and the termination shall be deemed as the occurrence of aqualified contingency. (1981 (Reg. Sess., 1982), c. 1252, s. 1; 1985, c. 406, ss. 4, 5; 2005‑192,s. 2.)