The 5% probability test determines whether or not the probable amount left in a Charitable Remainder Trust constitutes a charitable deduction. If the probable amount left for the charity is less than 5%, then there is no charitable deduction. 

 

The 5% test is sensitive to the age of the client(s), the 7520 rate, and the amount of distribution (Annual Annuity and Pct of Initial Balance). The older the client, the greater the chance that he or she will fail the test. 

 

If your planned Charitable Remainder Trust violates this test, an error message appears. This message tells you that the test failed and suggests reducing the amount of distribution to make the charitable deduction qualify. Click OK to close the message box. 

 

WARNING: You will only see the message box once! If you do not adjust the Annual Annuity payout or the Pct of Initial Balance, the charitable deduction remains disqualified. If you adjust either or both of these prompts, and the error message does not appear, the charitable deduction qualifies. 

 

Tip: A good indication of whether or not the charitable deduction qualifies is the Use Charitable Deduction of $ check box. If the box is inaccessible, the charitable deduction does not qualify. If it is accessible, then the charitable deduction does qualify.

 

 

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