A charitable remainder unitrust (CRUT) is an irreversible trust that names a charitable institution as remainder beneficiary, and pays one or more income beneficiaries a specified percentage of the value of the trust assets as it is revalued every year. If the trust principal increases in value, the income payout will also increase. The specified percentage must be at least 5%, but not more than 50%. The value of the charitable remainder must be at least 10% of the net fair market value of all property transferred to the trust. This value is determined at the time of the transfer.

Unlike the charitable remainder annuity trust, which not only comes in one basic form, the charitable remainder unitrust allows additional contributions to be added to the trust after the initial contribution. The CRUT can be the straight or fixed-percentage unitrust, the net-income without make-up unitrust, the net-income with make-up unitrust, and the flip unitrust. The annual payout also differs between the charitable remainder annuity trust and the charitable remainder unitrust as in a CRAT, an annuity amount is a sum certain, a fixed percentage of the initial value of the property transferred to the trust. For example, if $1,000,000 is transferred to the trust, and the payout is 5%, $50,000 is received by the income beneficiary each year until the trust is terminated. This is independent of the fluctuating value of the trust principal or the earnings of the trust. However, with a CRUT, a unitrust amount is a fixed percent of the annually revalued trust corpus. This means that if the percentage payout is 5%, and the CRUT has risen in value from $1,000,000 to $1.5 million in the second year, the income beneficiary will receive $75,000 payout, as opposed to $50,000 in the first year. Similarly, if in the third year, the trust’s value drops to $500,000, the income beneficiary will only receive $25,000.

In conclusion, charitable remainder unitrusts are not only irrevocable, but the trust must pay out a fixed percentage of the fair market value of the principal, where the fixed percentage payout cannot be less than 5% or more than 50% of the annually revalued trust corpus. The income can be paid once a year, twice a year, quarterly, monthly, or otherwise stated in the trust. Please contact us today so American Kids Cancer Fund can be involved with your trust.