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 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.
Other Contributions
The CRUT differs from the Charitable Remainder Annuity Trust (CRAT) because it may continue to collect assets in later years and the stream paid out must be a minimum of 5% of the yearly 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
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. - 23229
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 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.
Other Contributions
The CRUT differs from the Charitable Remainder Annuity Trust (CRAT) because it may continue to collect assets in later years and the stream paid out must be a minimum of 5% of the yearly 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
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. - 23229
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 CRUTs, CRATs, and other financial planning topics.
posted by X - Men @ 1:59 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home