The Charitable Remainder Trust (CRT) is an estate planning tool that allows you to make a gift in exchange for an agreement to provide you or your beneficiaries with an income for life or a set number of years. Learn how a CRT can play a crucial role as part of your estate plan.
A CRT lets you establish an irrevocable trust with money, securities or other property. The next step is to determine the terms of the trust. This will include:
A trustee (either you or someone else you choose) will manage the assets. Knowing that, it may be wise to choose a financial professional to be the trustee.
The percentage you receive must be at least 5% of the original value of the trust. Your income – either a fixed dollar amount or a set percentage of the trust’s value – is based on the plan you choose.
The two general types of charitable remainder trusts classified by the type of initial payment are:
A CRT allows you to choose the duration of the payouts. You can opt for a set period of years or for the lifetime of the individual beneficiaries.
When all of the payments have occurred (or upon the death of the last beneficiary), the trust is dissolved and the remainder of the assets are paid to the charity or charities you have chosen.
With a wide selection of CRT plans to choose from, you can customize your estate plan. The trust plans are:
|Type of Trust Plan||Features||Tax Deduction?*||May reduce capital gains and estate taxes?|
|Standard Charitable Remainder Unitrust (STAN CRUT)||A STAN CRUT pays a set percentage of the current fair market value of the trust each year during the trust term to the individual beneficiaries (the unitrust amount).||Yes||Yes|
|Net Income Charitable Remainder Unitrusts (NICRUTs)||A NICRUT pays the lesser of the trust net income or the unitrust amount each year during the trust term to the individual beneficiaries.||Yes||Yes|
|Net Income with Make-Up Provisions Charitable Remainder Unitrusts (NIMCRUTs)||NIMCRUTs are similar to NICRUTs in that they pay the lesser of trust net income or the unitrust amount each year during the trust term to the individual beneficiaries. NIMCRUTs include a make-up provision allowing for the deficiency between the net income and the unitrust amount to be made up in future years when the net income is greater than the unitrust amount.||Yes||Yes|
|Flip Charitable Remainder Unitrusts (FLIP CRTs)||FLIP CRTs are a combination of the standard CRT and the NIMCRUT or the NICRUT. A FLIP CRT provides that when a certain target designated in the trust document is reached, then the CRT flips from being a NIMCRUT or a NICRUT to a standard CRT paying a fixed percentage unitrust amount each year.||Yes||Yes|
*For a portion of the trust’s value in the year you establish the trust.
The tax information herein is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
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