Using Charitable Remainder Trusts as Part of Your Estate Plan


A retired couple on the beach in the sunshineThe 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.

Establishing a trust

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:

  • Naming the beneficiaries
  • Percentage of the trust’s value to be paid out annually
  • Duration of the payments
  • Naming a charity or charities to receive the remainder

The role of the trustee

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 paid to you

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:

  • Charitable Remainder Annuity Trusts (CRATs)
  • Charitable Remainder Unitrusts (CRUTs)

Terms of the trust

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.

Types of CRT plans available

With a wide selection of CRT plans to choose from, you can customize your estate plan. The trust plans are:

Type of Trust PlanFeaturesTax Deduction?*May reduce capital gains and estate taxes?
Types of CRT Plans Available
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).YesYes
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.YesYes
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.YesYes
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.YesYes

*For a portion of the trust’s value in the year you establish the trust.

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