The Benefits of a Charitable Remainder Unitrust
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 irrevocably transfer securities or property to a trustee. In return, the trustee would provide the donor (or other beneficiary) income from the property for life.
A CRUT also guarantees that if the donor dies before their spouse they could receive income from the donated property of life. The donor would be compensated based on a fixed percentage of the fair market value of the assets placed in the trust. The assets would be revalued annually.
Additional Contributions
The CRUT may receive assets in later years, unlike the Charitable Remainder Annuity Trust (CRAT) which does not. The CRUT also varies from a CRAT since the stream paid out by the CRUT trust must be a minimum of 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.
