The Advantages of a Charitable Remainder Unitrust PDF Print E-mail
Written by Hank Brock   
Saturday, 27 June 2009 09:00
A Charitable Remainder Unitrust (CRUT) was created to provide an income to a non-charitable beneficiary while simultaneously transferring the remainder interest to a qualified charity.
by HankBrock


A Charitable Remainder Unitrust (CRUT) was created to provide an income to a non-charitable beneficiary while simultaneously transferring the remainder interest to a qualified charity.

The donor would irreversibly transfer securities or property to a trustee. The trustee would then pay the donor (or other income beneficiary) income from the property for life.

The donor could also provide that if he or she predeceased a spouse, the spouse in turn would receive income from the donated property for life. The donor would receive payments based on a fixed percentage of the fair market value of the assets placed in trust. The assets would be revalued each year.

Further Contributions

Unlike the Charitable Remainder Annuity Trust (CRAT), however, the CRUT may continue to receive assets in later years. The CRUT also differs from a CRAT since the stream paid out by the CRUT trust must be at least 5% of the annual reappraised value of the corpus.

Thus, while the CRAT pays a fixed sum of income that never varies in amount, the CRUT may distribute greater or lesser amounts of income, depending on the reappraised value of the corpus and accumulated income.

Appreciation

The quantity of the payment to the non-charitable beneficiary can increase each year if the value of the corpus and income continues to appreciate. For that reason, the CRUT is an efficient method of fighting inflation. On the other hand, if the value of the assets continues to decrease in value over so many years, the CRUT may actually pay less income to the non-charitable beneficiary than was initially proposed.

A grantor should fund the corpus of a trust with assets that pay a guaranteed rate of return if the grantor wants to ensure a yearly increase in the value of the income payment to the non-charitable beneficiary.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Hank Brock is president of Brock and Associates, LLC, a firm specializing in financial planning, retirement, estate, and tax planning. Visit him online for further information on one life CRUTs and other financial planning topics.