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GiftLaw Pro Home   >  Chapter 3 - Deferred Gifts  >  3.1 Annuity Remainder Trust  >  3.1.4 5% Probability Test/10% Termination Test  >  Basic Quiz

Basic Quiz - 3.1.4 5% Probability Test/10% Termination Test

1. All charitable remainder trusts must pass a 5% probability test.
           
2. The 5% probability test is applied to all charitable remainder annuity trusts.
           
3. If given the selected applicable federal rate there is a 5% or greater probability that the donors will live long enough for the trust to be exhausted, then the trust will not pass the 5% probability test.
           
4. If a charitable remainder annuity trust does not pass the 5% probability test, the trust will not qualify as a tax-exempt trust.
           
5. Payment frequency is a factor when determining whether an annuity trust passes the 5% probability test.
           
6. With a testamentary annuity trust, the 5% probability test is applied when the will containing the trust document is signed.
           
7. If a testamentary annuity trust fails the 5% probability test, it may be possible to reform the trust so that it passes the test.
           
8. With a charitable remainder annuity trust, it may be possible to exhaust the trust corpus.
           
9. To ensure better likelihood of passing the 5% probability test, the donor should choose the highest applicable federal rate allowable.
           
10. The purpose of this 5% probability test is to protect the charitable remainder.