A charitable remainder unitrust (CRUT) is a separate tax-exempt trust governed by an irrevocable agreement that yields payments based on a fixed percentage of the trust’s current value (determined annually). This means as the value goes up, so will your payments.
Your CRUT can be funded by almost any asset to pay you and others you named for life or for a term of up to 20 years.
Is a charitable remainder unitrust right for you?
Here are some simple questions to help you decide:
- Are you considering a gift amount of $25,000 or more?
- Do you want the possibility of increased income?
- Do you want to save on income taxes or capital gains taxes?
- Do you want to choose the person who administers your gift and guides its investments?
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Example
Audrey, 76 and her husband John, 75, have many stocks in their portfolio that have appreciated substantially in the years they have owned them. They are passionate about supporting community healthcare, but they also would welcome a way to receive greater income from their investments without paying unnecessary capital gains tax.
After consulting with their advisor, Audrey and John find that a five percent charitable remainder unitrust funded with $500,000 in assets will meet their needs perfectly. They fund their unitrust with $400,000 in stocks plus $100,000 from a money market fund. They paid a total of $75,000 for the stocks, which currently produce about two percent in dividends each year. Their money market fund has been earning about 2 percent interest annually.
Audrey and John will avoid capital gains tax and generate income while helping Rochester Regional Health by designating the remainder of their trust to the health system through their estate plan.