CRUT
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 type of split-interest gift that provides income to the donor (or other beneficiaries) for life or a term of years, with the remainder going to charity. Unlike a CRAT, the annual payment from a CRUT is calculated as a fixed percentage of the trust's assets, which are revalued each year. This means payments can fluctuate based on the trust's investment performance, potentially providing protection against inflation.
Usage Context
Essential when studying planned giving strategies, tax-advantaged charitable vehicles, and estate planning techniques. Important for understanding how donors can maintain income while making significant charitable gifts.
Common Confusions
- Confusing CRUT with CRAT - CRUT payments vary with asset values while CRAT payments are fixed
- Thinking additional contributions can be made to both types (only CRUTs allow this)
- Misunderstanding that payments are guaranteed to increase (they fluctuate with market performance)
- Confusing the remainder beneficiary (charity) with the income beneficiary (donor/designee)
