The Advantages of a Charitable Remainder Unitrust
A Charitable Remainder Unitrust (CRUT) was created to provide an income to a non-charitable beneficiary while simultaneously transferring the remainder interest to a qualified charity.
The donor would irreversibly transfer securities or property to a trustee. The trustee would then pay the donor (or other income beneficiary) income from the property for life.
The donor could also provide that if he or she predeceased a spouse, the spouse in turn would receive income from the donated property for life. The donor would receive payments based on a fixed percentage of the fair market value of the assets placed in trust. The assets would be revalued each year.
Additional 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
If the value of the corpus and income continues to appreciate, the amount of the payment to the non-charitable beneficiary may increase with each succeeding year. This makes the CRUT an effective means of fighting inflation. If, however, the value of the assets continues to depreciate over a period of years, the CRUT may actually pay less income to the non-charitable beneficiary than was originally intended.
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. - 23196
The donor would irreversibly transfer securities or property to a trustee. The trustee would then pay the donor (or other income beneficiary) income from the property for life.
The donor could also provide that if he or she predeceased a spouse, the spouse in turn would receive income from the donated property for life. The donor would receive payments based on a fixed percentage of the fair market value of the assets placed in trust. The assets would be revalued each year.
Additional 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
If the value of the corpus and income continues to appreciate, the amount of the payment to the non-charitable beneficiary may increase with each succeeding year. This makes the CRUT an effective means of fighting inflation. If, however, the value of the assets continues to depreciate over a period of years, the CRUT may actually pay less income to the non-charitable beneficiary than was originally intended.
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. - 23196
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 @ 1:31 AM
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