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Home > Estate Planning > What is a Charitable Remainder Unitrust (“CRUT”)?

What is a Charitable Remainder Unitrust (“CRUT”)?

Estate Planners | Monday, February 21st, 2011

When planning an estate, the charitable remainder unitrust or CRUT is often a popular choice. This type of trust allows for you to transfer your assets to a charitable remainder trust now and receive income for the rest of your life or for a period of years. When you die, the charity of your choice will receive the assets wholly and fully. This type of charitable trust is often chosen by those donors who need an income for life or for a particular time period and who desire a rise in income as the value of the trust increases. A CRUT donor should be able to tolerate some investment risk to provide for the growth of the trust, and should be desirous of making additional gifts to the trust on down the road. Most donors of CRUTs are aged fifty-five to eighty.

Benefits of the Charitable Remainder Unitrust

There are several advantages to the charitable remainder unitrust, with the most obvious being that it provides a variable payment structure with income for your lifetime. You can choose multiple beneficiaries for this type of trust, and the assets that you transfer to the trust can be reinvested under the discretion of the trustee for the trust, and the trustee can be you, if that is your wish. This type of trust also allows for flexible investment possibilities for the beneficiary.

With a CRUT, you designate the income beneficiaries and name the charitable remainder beneficiaries. You also decide on the payout rate for the charitable trust, and you determine the frequency of trust payments. You also select the term of the trust, unless the trust expires upon your death.

Types of Charitable Remainder Unitrusts

Charitable remainder unitrusts can be broken down into four sub-types. They are:

* Standard CRUT. This type of trust pays a pre-determined amount from the trust without regards to how much income the trust earns. This payout is a stated percentage of the assets of the trust as valued each year.

* Net income CRUT. This type of trust pays a pre-determined amount from the trust provided the payout does not invade the principal of the trust. This payout is also a stated percentage of the trust’s assets as valued each year.

* Net income with makeup CRUT. This trust will pay a pre-determined amount from the trust provided the payout does not invade the principal of the trust, but this trust also has the ability to “make up” income in the years that follow is the income is less than the pre-determined amount.

* Flip CRUT. This type of trust converts to a standard unitrust when a specific date occurs, or a pre-determined event takes place, like a death, a birth, or other contingencies.

As with any type of trust, consult your financial or estate planner to find out if the charitable remainder unitrust is the best trust to secure your financial future.

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