Glossary term
Charitable Remainder Unitrust (CRUT)
A charitable remainder unitrust is a CRT that pays a fixed percentage of the trust's value to income beneficiaries before the remainder goes to charity.
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What Is a Charitable Remainder Unitrust?
A charitable remainder unitrust, or CRUT, is a type of charitable remainder trust that pays a fixed percentage of the trust's value to income beneficiaries before the remaining assets go to charity.
Unlike a charitable remainder annuity trust, which pays a fixed dollar amount, a CRUT payment can rise or fall as the trust value changes.
Key Takeaways
- A CRUT is a charitable remainder trust with a percentage-based payout.
- The payout is based on the trust's value, usually recalculated annually.
- Payments can vary as investments rise or fall.
- CRUTs may allow additional contributions if the trust terms and rules permit.
- A CRUT requires careful tax, legal, investment, and charitable planning.
How a CRUT Works
The donor transfers assets to an irrevocable trust. The trust pays one or more income beneficiaries a fixed percentage of the trust value for a permitted period. When the income period ends, the remaining assets pass to charity.
Because the payout is tied to trust value, the beneficiary's income may change over time. Strong investment performance can increase future payments. Weak performance can reduce them.
CRUT Versus CRAT
Trust type | Payout style |
|---|---|
CRUT | Fixed percentage of trust value |
CRAT | Fixed dollar amount |
Why People Use CRUTs
CRUTs may appeal to donors who want charitable intent, an income stream, and some connection between payment levels and trust investment performance. They can also be relevant when appreciated assets are being contributed as part of a broader charitable and tax plan.
The complexity is real. Donors need to consider payout rate, asset mix, tax character of distributions, administration, charity selection, and whether the trust structure fits family needs.
The Bottom Line
A charitable remainder unitrust is a CRT with a percentage-based payout. It can support charitable giving and income planning, but it should be designed and administered with professional tax and legal guidance.