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CRUT Explained: The Legal Framework of Charitable Remainder Unitrusts
Definition & Meaning
A charitable remainder unitrust, commonly abbreviated as CRUT, is a type of irrevocable trust. In a CRUT, the beneficiary receives a fixed percentage of the net fair market value of the trust's assets annually. This percentage must be at least five percent. The payments can be made for the lifetime of the beneficiary or for a term of up to 20 years. The amount received each year may fluctuate based on the trust's asset value. Additionally, it is possible to make further contributions to the trust after it has been established.
Table of content
Legal Use & context
CRUTs are primarily used in estate planning and charitable giving. They allow individuals to support charitable organizations while also providing income to themselves or other beneficiaries. Legal professionals often draft CRUT agreements to ensure compliance with tax laws and regulations. Users can manage CRUTs through legal templates available from services like US Legal Forms, which can assist in creating the necessary documentation.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: Jane establishes a CRUT with an initial value of $100,000. She specifies a fixed percentage of 6%. Each year, Jane will receive $6,000, which may increase or decrease based on the trust's performance.
Example 2: John sets up a CRUT for his children, allowing them to receive annual payments for 15 years. He contributes additional assets to the trust after its creation to increase its value and the beneficiaries' payments. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Key Differences
California
Specific tax regulations may apply to CRUTs.
New York
State law may affect the reporting requirements for CRUTs.
Texas
CRUTs may have different implications for property taxes.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Charitable Remainder Trust (CRT)
A trust that provides income to a beneficiary for a term, with remaining assets going to charity.
CRUT pays a fixed percentage, while CRT pays a fixed dollar amount.
Unitrust
A trust that pays a fixed percentage of the trust's value to beneficiaries.
CRUT specifically involves charitable giving, whereas unitrusts can be for any purpose.
Common misunderstandings
What to do if this term applies to you
If you are considering establishing a CRUT, it is advisable to consult with a legal professional to ensure compliance with all regulations. You can also explore US Legal Forms for templates that can assist in creating the necessary trust documents. If your situation is complex, seeking professional legal advice is essential.
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