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 make sure that if he or she died before a spouse that the spouse would collect income from the donated property for life.
The donor would collect expenses based on a set percentage of the fair market value of the assets placed in trust.
Every year the assets would be revalued.
Further Contributions The CRUT differs from the Charitable Remainder Annuity Trust (CRAT) because it may continue to collect assets in later years and the stream paid out must be a minimum of 5% of the yearly 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.