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Wed
19
Mar
2008

Public disclosure of 5227

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The new form 5227 is open to public disclosure and depending upon how the IRS implements the new disclosure requirement, 5227s could be widely released as 990 forms are currently.  The new 5227 was intended to prevent donor / income beneficiary names and information from being disclosed (schedule A is not public) but most trusts list the donor or beneficiary name in the name of the trust, which is public. All 5227 filers should be aware that donors names, if in the trust name, will be public.  The IRS has been contacted regarding this issue and we are awaiting a response.  Is anyone else concerned about or working on this issue?
Thu
27
Mar
2008
170
points
#2 by Mark Weinberg    

Disclosure

George, I've always been worried about the fact that CRTs need not notify the remainder beneficiary of the existence of the Trust. No one is representing its interest, so that if the corpus is wasted or converted, there may be nothing for the charity to do. The argument that no charity has any interest if the CRT permits substitution begs the question: Then who's watching the store? The State AGs already have too much to do. Why not require that at least the current remainder beneficiary's name be listed on the 5227 that is made public; Guidestar could then index and list this information so that there would be some oversight by those the donor is telling the IRS it will eventually benefit. Right now, I don't think there is enough enforcement review of 5227s to prevent what could well be widespread exploitation of CRTs. What do you think?

Mark B. Weinberg Weinberg & Jacobs, LLP 11300 Rockville Pike Rockville, MD 20852 Voice 301-468-5500 Fax 301-468-5504

Fri
28
Mar
2008
181
points
#1 by George Atwood    

Disclosure

Mark, I absolutely agree that full disclosure of 5227s is a great thing for all the reasons you state.

The particular issue is with the common naming convention of using the donor's or beneficiary's full name in the title of a trust. The regs intent is to carefully protect the private donor and non-charitable beneficary information. Schedule A is not open to public inspection for this reason. However, due to longstanding convention in naming trusts (prior to required public disclosure of 5227s) the full name of the donor or income beneficiary is ususally contained in the name of the trust, and the name of the trust is required to be disclosed on the 5227.

Example: The 'John Q. Private charitable remainder trust' is funded with $1 zillion by Mr. Private in 2000, having charity as trustee. Mr. Private is very prominent wealthy person and likes to keep things confidential. The gift is anonymous and charity does not announce the donor or the $1 zillion gift. Now the IRS rules change, and suddenly the 5227 for the John Q. Public CRT is released on guidestar etc... Maybe the trustee can amend the trust to get donor's name out of it?....Most are not amendable. If we anticipated disclosure, we would have named the CRT 'The plain vanilla charitable trust under agreement dated 1/1/2000"

Result: all existing CRT donor / beneficiary full names will be fully disclosed publically if the name is part of the name of the trust ( >90% are in my experience) - this was never understood or necessarily accepted by the donor when the trusts were established. I believe this was not the IRS intent of the new disclosure regs.