CHARITABLE REMAINDER UNITRUST
Back to GlossaryDefinition
A trust that provides a payment to the donor (usually for life) equal to a fixed percentage of the trust assets as valued annually. The remainder interest of the trust passes to a named charitable organization.
Summary
A Charitable Remainder Unitrust (CRUT) is a tax-exempt trust that provides income to beneficiaries for a specified period, after which the remaining assets go to charity. Unlike other trusts, the CRUT pays a fixed percentage (not a fixed dollar amount) of the trust's value each year, which is recalculated annually. This means payments can fluctuate based on the trust's performance, potentially providing inflation protection and growth opportunities while offering significant tax benefits to the donor.
Usage Context
Understanding CRUTs is crucial when studying estate planning strategies, charitable giving techniques, tax-advantaged wealth transfer methods, and retirement income planning. This concept appears frequently in discussions about balancing philanthropic goals with financial security.
Common Confusions
- Thinking CRUT payments are fixed dollar amounts like annuity trusts
- Confusing the annual revaluation requirement with other trust types
- Misunderstanding that additional contributions are allowed in CRUTs but not CRATs
- Believing the charity gets a guaranteed amount rather than whatever remains
- Assuming all charitable remainder trusts work the same way
