Tax-Efficient Charitable Remainder Unitrusts

Tax-Efficient Charitable Remainder Unitrusts

A Tax-Efficient Charitable Remainder Unitrust (CRUT) is a type of irrevocable trust that provides income to the donor or other beneficiaries for a specified term, after which the remaining assets are transferred to a designated charitable organization.

The trust pays out a fixed percentage of its value (revalued annually) to the income beneficiaries, which can be beneficial for retirement planning as it allows individuals to receive income while also making a charitable contribution. The contributions to the CRUT are eligible for immediate charitable income tax deductions, subject to certain limitations.

For example, if a donor establishes a CRUT with a $1 million contribution and specifies a 5% payout rate, the trust would pay $50,000 annually to the beneficiaries. After the trust term ends, the remaining assets would be distributed to the chosen charity. This structure allows donors to reduce their taxable income during their lifetime while supporting charitable causes.