The Best Kept Secrets of a Charitable Remainder Unitrust
A Charitable Remainder Unitrust (CRUT) is used to provide an income to a non-charitable beneficiary while at the same time transferring the remainder interest to a qualified charity.
The donor would permanently transfer securities or property to a trustee. The trustee, in return, would reimburse the donor (or other income 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.
Further Contributions
Unlike the Charitable Remainder Annuity Trust (CRAT), however, the CRUT may continue to receive assets in later years. The CRUT also differs from a CRAT since the stream paid out by the CRUT trust must be at least 5% of the annual reappraised value of the corpus.
Consequently the CRUT, depending on the reappraised value of the corpus and accumulated income, can allocate greater or lesser amounts of income while the CRAT pays a set sum of income that never fluctuates in amount.
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.
If a grantor requests to guarantee a yearly increase in the value of the income payment to the non-charitable beneficiary, the grantor should finance the corpus of such a trust with assets that pay a guaranteed rate of return. - 23218
The donor would permanently transfer securities or property to a trustee. The trustee, in return, would reimburse the donor (or other income 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.
Further Contributions
Unlike the Charitable Remainder Annuity Trust (CRAT), however, the CRUT may continue to receive assets in later years. The CRUT also differs from a CRAT since the stream paid out by the CRUT trust must be at least 5% of the annual reappraised value of the corpus.
Consequently the CRUT, depending on the reappraised value of the corpus and accumulated income, can allocate greater or lesser amounts of income while the CRAT pays a set sum of income that never fluctuates in amount.
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.
If a grantor requests to guarantee a yearly increase in the value of the income payment to the non-charitable beneficiary, the grantor should finance the corpus of such a trust with assets that pay a guaranteed rate of return. - 23218
About the Author:
Hank Brock is president of Brock and Associates, LLC, a firm specializing in financial planning, retirement, estate, and tax planning. Visit him online for further information on CRUTs, CRATs, and other financial planning topics.
posted by X - Men @ 2:00 AM
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