Understanding Charitable Remainder Unitrust: A Comprehensive Guide

Q: Can I change the beneficiaries of a CRUT?

No, once established, a CRUT is irrevocable, and the beneficiaries cannot be changed.

Q: What happens if the trust assets decrease in value?

The percentage paid to beneficiaries will adjust based on the current fair market value of the trust assets.

Definition & Meaning

A charitable remainder unitrust (CRUT) is a specific type of irrevocable trust designed to benefit both a non-charitable beneficiary and a charitable organization. Once established, the trust pays a fixed percentage of its assets' value to a designated beneficiary, typically on an annual basis. After a specified period, often upon the death of the trust creator (settlor), the remaining assets are transferred to a charitable organization. This structure allows individuals to provide for their loved ones while also supporting charitable causes.

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Legal Use & context

Charitable remainder unitrusts are commonly used in estate planning and charitable giving strategies. They fall under the realm of trust law and tax law, as they provide potential tax benefits to the settlor. Individuals may use CRUTs to secure a steady income for themselves or their beneficiaries while ensuring that a portion of their estate ultimately supports a charitable organization. Users can manage the creation and administration of CRUTs with appropriate legal forms, such as those offered by US Legal Forms.

Key legal elements

The trust must pay a fixed percentage (between five percent and fifty percent) of its net fair market value to non-charitable beneficiaries.
Payments must occur at least annually.
The trust can last for a term of years (up to 20 years) or for the life of the beneficiaries.
After the payment term, the remaining trust assets must be distributed to a qualified charitable organization.
The remainder interest must be at least ten percent of the property's net fair market value when contributed to the trust.

Real-world examples

Here are a couple of examples of abatement:

Example 1: A retiree establishes a CRUT, naming their adult child as the beneficiary. The trust pays the child a fixed percentage of its value each year. Upon the retiree's passing, the remaining assets are donated to a local charity.

Example 2: A couple creates a CRUT to provide income during their retirement years. After their deaths, the trust assets are directed to a university scholarship fund. (hypothetical example)

Relevant laws & statutes

The primary statute governing charitable remainder unitrusts is 26 USCS § 664. This section outlines the requirements for establishing and maintaining a CRUT, including the necessary distributions and the rules regarding the remainder interest.

Comparison with related terms

Term	Definition	Key Differences
Charitable Remainder Annuity Trust (CRAT)	A trust that pays a fixed dollar amount annually to beneficiaries.	Unlike CRUTs, CRATs do not vary payments based on the trust's asset value.
Revocable Trust	A trust that can be altered or revoked by the settlor during their lifetime.	CRUTs are irrevocable, meaning they cannot be changed once established.

Common misunderstandings

What to do if this term applies to you

If you are considering establishing a charitable remainder unitrust, consult with a legal professional who specializes in estate planning and tax law. They can help you understand the implications and benefits of a CRUT. Additionally, you can explore US Legal Forms for templates and resources to assist in creating your trust.

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Quick facts

Attribute	Details
Minimum Distribution	Five percent of net fair market value
Maximum Distribution	Fifty percent of net fair market value
Duration	Up to 20 years or for the life of beneficiaries
Remainder Beneficiary	Must be a qualified charitable organization