What is a CRUT (Charitable Remainder Unitrust)?

A CRUT is a tax-exempt structure with many tax benefits and is well suited for appreciated assets you have not yet sold. In exchange for donating some of the money in the trust to a charity, you can defer the taxes with significant tax benefits: tax deferral and the ability to lower your tax rate via income smoothing, that you would otherwise pay when selling an asset and grow your asset tax-free inside the trust. Plus, CRUTs give you an immediate charitable income tax deduction when you put the assets.

So, how does a CRUT work? It is a form of a tax-deferred account, similar to an IRA an other Qualified Retirment Plans, designed to incentivize charitable giving in exchange for 3 significant tax benefits:

• Tax deferral: You don’t have to pay taxes on gains realized inside the trust
• The ability to lower your tax rate via income smoothing
• An upfront charitable deduction: You receive a charitable deduction you can use to reduce your taxes. The charitable deduction is worth at a minimum 10% of the value of the assets you put in the CRUT. The actual deduction is based on several criteria including age of the Trustor, age of any Income Beneficiary and the interest rate of the Trust.

  As you likely know by now, charitable remainder trusts (CRUTs) are a form of tax-deferred account, much like an IRA or other Qualified Retirement Programs, that are designed to incentivize charitable giving in exchange for
   We offer three basic forms of Charitable Remainder Unitrust: the standard CRUT, the NIMCRUT, and the Flip CRUT. These formats carry similar benefits — they are all tax exempt, you get a charitable deduction when you put assets into each, and you’ll leave the remainder for a charity at the end. The primary difference — and the focus of this post — is how and when you receive distributions from the

How Does a CRUT Work?

Setting up a Charitable Remainder Trust is easy.

• Choose an asset. You, the individual setting up the trust, choose an appreciated asset that you’d like to contribute to a trust. This could be anything that has appreciated or is likely to appreciate significantly; the most common assets we see from our users are start-up equity, cryptocurrency, public stocks, small- and medium-sized businesses, real estate, and other private assets.
• Designate a Trustee. which can any individual, company or Financial Institution. You can also act as your own Trustee.
• Designate a beneficiary. You designate an income beneficiary — the person who will receive payments from the trust every year. Most of our users choose to be the income beneficiary themselves and/or name a partner or child.
• Designate a Charity. They must have a tax-exemption designation from the I.R.S
• Transfer assets & get a deduction. You transfer your chosen assets to the trust, and you get an immediate charitable deduction, usually 10% but can be greater based on specific criteria, of the value of the asset you put in.
• Sell assets tax free. You sell your asset and, in most cases, the trust pays no taxes on that sale, allowing you to grow more money for longer.
• Reinvest the savings. You’ve just saved as much as 40% on your taxes – more if these are short-term capital gains – and you get to reinvest those savings and diversify your portfolio.
• Take your annual withdrawal. You will receive a distribution that depends on the type and length of Charitable Remainder Trust you choose.
• Leave the remainder to charity. The remainder —whatever is left in the trust at the end of the trust’s term — is donated to a charitable organization. This is usually somewhere between 10% and 100% of the initial asset value.
• Profit. Stepping back, you can see the gains: Charitable Remainder Trusts typically result in 50% to 100% greater returns, even after you make your charitable donation.

What Are The Tradeoffs of Charitable Remainder Trusts?

There are a few tradeoffs associated with setting up a CRT.

• A CRT is an irrevocable trust, so you can’t just change your mind after you contribute assets. With that said, the trust isn’t locked in until you contribute, so there is some flexibility on the front end.
• You are only allowed to withdraw a certain percent of trust assets each year, so in the early years of the trust you are giving up liquidity of assets for the potential of greater future wealth. But the distributions add up quickly, so you’ll typically have access to 100% of your initial

What are the Benefits of the CRT

Like all Charitable Remainder Trusts, setting up and reaping the benefits from a Charitable Remainder Unitrust is easy:

1. Asset Choice. You, the individual setting up the trust, choose an appreciated asset(s) that you would like to contribute to a trust.
2. Designate who benefits. You choose the person(s) who will receive distributions from the trust every year, they are also known as an income beneficiary.
3. Asset transfer & charitable deduction. After you transfer your chosen assets to the trust, you get an immediate charitable deduction equal to ~10% or greater of the asset(s) you put in.
4. Tax-free sales. You sell your asset and are able to pay no taxes on that sale as the trust is tax exempt.
5. Reinvest the savings. You’ve just saved as much as 50% on your taxes, and you can reinvest those savings and diversify your portfolio simultaneously.
6. Take your annual withdrawal. You are entitled to at least yearly distributions; the amount and control you have on the distribution size depends on the type and length of Charitable Remainder Trust you choose (more on these choices below).
7. Leave the remainder to charity. The remainder —whatever remains in the trust at the end of the trust’s term — is donated to a charitable organization that you can choose. You are required to donate a minimum of 10% of the initial value of the Trust to your nominated Charity.
8. Profit. Charitable Remainder Trusts typically result in 50% to 100% greater returns or more when used with appreciated assets, even after the charitable donation.
9. The |Assets donated to the Trust are removed from you Estate, lowering the value for the calculation of the Unified Tax Credit. (Estate Tax)