Charitable Remainder Unitrust (CRUT)
A Unitrust, also called a Charitable Remainder Unitrust or CRUT, requires that a fixed percentage (up to 5%) of the annual value of trust assets be paid to the income beneficiary. For example, a CRUT with a value of $2,000,000 and a 5% payout would pay $100,000 to the income beneficiary in that year. If the investment performance for that year was 10% and the value of the trust on the valuation date was $2,200,000 the income beneficiary would receive $110,000 in that year. The Unitrust will generally produce higher amounts of income but a smaller tax deduction.
A Unitrust is good for someone looking for a specific percentage return. This can be used to keep up with inflation if the trust value continues to grow over the years.
Advantages of a Charitable Remainder Unitrust
Income: Create an income stream for yourself, spouse or other loved ones. A charitable remainder unitrust pays income based on a fixed percentage (up to 5%) of the trust assets as revalued once per year.
Flexibility: Another benefit of the Charitable Remainder Unitrust is that it will allow for additional contributions. You can also use a variety of assets to fund a CRUT. You can choose lifetime or a term of years and payment options of quarterly, semiannually or annually.
Avoid capital gains tax: You can eliminate immediate capital gains on the sale of appreciated assets, such as stocks, bonds and real estate.
Charitable deduction: You may receive a substantial charitable income tax deduction in the year you make the gift, with an additional five years to carry forward any unused deduction.
Diversification: Assets used to fund the trust will be placed into a diversified portfolio managed by professionals.
Estate tax savings: You will reduce estate taxes that your heirs might have to pay by removing assets prior to your death.
Satisfaction: You will know that you are benefiting future generations of Elmira College students. One advantage of a unitrust is that income may increase, provided the trust principal grows over time. Also, you can make additional contributions at any time. It will give you the ability to keep up with inflation. The suggested minimum investment amount to establish a charitable remainder unitrust is $50,000.