Charitable Trust Remainder Unitrust

A Charitable Trust Remainder Unitrust (CRUT) is a specific type of charitable remainder trust that provides income to the non-charitable beneficiary for a specified period or until their death, after which the remaining assets go to a designated charity. This structure allows the donor to receive a charitable deduction while also providing income during their lifetime or a set term.

In a CRUT, the donor transfers assets into the trust, and the assets are then managed to produce income. Unlike a charitable remainder annuity trust (CRAT), which pays a fixed dollar amount to the income beneficiary, a CRUT pays a percentage of the trust’s value, recalculated annually. This means that as the trust’s assets appreciate or depreciate in value, the income amount can vary.

For example, if a donor contributes $100,000 to a CRUT with a 5% payout rate, and in the first year the trust grows to $110,000, the income for that year would be $5,500. If the trust value decreases to $90,000 in the following year, the income would then be $4,500.

A CRUT serves multiple purposes: it provides income to the donor or other beneficiaries, offers potential tax benefits, and ultimately supports a charitable cause after the income period ends. Additionally, in Texas, including Houston, the establishment and administration of a CRUT must comply with both federal and state laws, which can affect the structuring and tax implications of such trusts.