A Charitable Remainder Unitrust (CRUT) is put in place to provide an income to a non-charitable beneficiary and at the same time move the rest of the interest to a qualified charity.

The donor would permanently transfer securities or property to a trustee. The trustee, in return, would reimburse 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

The CRUT may receive assets in later years, unlike the Charitable Remainder Annuity Trust (CRAT) which does not. The CRUT also varies from a CRAT since the stream paid out by the CRUT trust must be a minimum of 5% of the annual reappraised value of the corpus.

Thus, while the CRAT pays a fixed sum of income that never varies in amount, the CRUT may distribute greater or lesser amounts of income, depending on the reappraised value of the corpus and accumulated income.

Appreciation

Each year the size of the payment to the non-charitable beneficiary can increase if the rate of the corpus and income continues to appreciate. Because of this, the CRUT is a valuable tool to fight inflation. If, over a period of time, the value of the assets continues to depreciate, the CRUT may in the end pay less income to the non-charitable beneficiary than was originally planned.

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.