The Benefits of a Charitable Remainder Unitrust
A Charitable Remainder Unitrust (CRUT) is used to provide an income to a non-charitable beneficiary while at the same time 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 make sure that if he or she died before a spouse that the spouse would collect income from the donated property for life. The donor would collect expenses based on a set percentage of the fair market value of the assets placed in trust. Every year the assets would be revalued.
Further 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.
Accordingly, the CRAT disburses a fixed sum of income that never differs in amount, while the CRUT, depending on the reappraised value of the corpus and accumulated income, may issue greater or lesser amounts of income.
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.
A grantor should fund the corpus of a trust with assets that pay a guaranteed rate of return if the grantor wants to ensure a yearly increase in the value of the income payment to the non-charitable beneficiary. - 23199
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 make sure that if he or she died before a spouse that the spouse would collect income from the donated property for life. The donor would collect expenses based on a set percentage of the fair market value of the assets placed in trust. Every year the assets would be revalued.
Further 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.
Accordingly, the CRAT disburses a fixed sum of income that never differs in amount, while the CRUT, depending on the reappraised value of the corpus and accumulated income, may issue greater or lesser amounts of income.
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.
A grantor should fund the corpus of a trust with assets that pay a guaranteed rate of return if the grantor wants to ensure a yearly increase in the value of the income payment to the non-charitable beneficiary. - 23199
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 charitable remainder unitrusts and other financial planning topics.
posted by X - Men @ 3:37 AM
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