Charitable Remainder Unitrust (CRUT)

Would you like to guarantee income for life while at the same time providing for your favorite charity? This gift method also includes the potential to increase your income as you get older.

A CRUT is designed for the person who wants to make a gift to charity, but needs income during life. This trust is especially beneficial for a person with highly appreciated securities or real estate. The owner can transfer the property to the trust and avoid all tax on the capital gain. A charitable tax deduction is available for the year the trust is created. One or more charitable organizations can be named as the remainder beneficiaries of the trust. The CRUT is one of the most complicated gift plans, and requires professionals to set up and manage.  We can assist you with this process.

Benefits of establishing a charitable remainder trust include:

1.    No tax on appreciated property or securities. Because the gift is irrevocable once placed in the trust and the money is eventually destined for charity, you won’t pay any capital gains tax. For example, if you owned 10,000 shares of ABC stock with a $10 cost basis and the stock is currently trading at $100 per share, the $900,000 profit would go entirely to the charitable remainder trust if you placed the shares into the trust before selling them. This allows for more assets to be invested for your benefit.

2.    Ability to increase current income from assets while benefiting from an income tax deduction. Continuing the above example, if the $1 million proceeds are invested in a diversified portfolio you can now receive 6 percent of the fair market value (initially $60,000) of the trust, which is revalued each year, until the death of the survivor beneficiary. At that point, the assets remaining in the trust will be transferred to the charity that you have designated.

3.    Flexibility to change charity designation.  Although you can never terminate the charitable remainder trust, you are free to change the charity designated as your beneficiary. In other words, if you originally wanted your church to receive 100 percent of the trust principal upon your death, you could easily go back later and lower than figure to 50 percent while instructing the remaining half be left to the Christian School Fund.

4.    Trust assets are excluded from calculation of estate tax. The value of assets held in a charitable remainder trust is excluded from the calculation of estate taxes, reducing your effective estate tax rate or possibly eliminating the liability altogether.

Many life income donors especially enjoy the fact that the assets in their charitable remainder trust can be professionally managed in a diversified portfolio. The trustee, which can be the charity, you, or a professional trustee, can partner with outside managers to provide a high level of service. The expense for this service will normally be around 1% per year of the assets.