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CRUTCharitable Remainder Unitrust
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* In private letter rulings, the IRS advised on the applicability of the private foundation rules to a charitable remainder trust; reformation of a defective charitable remainder unitrust; and the effect of certain modifications, including the addition of a tax reimbursement clause, on a grantor trust.
Charitable remainder annuity trusts (CRATs) and charitable remainder unitrusts (CRUTs) are differentiated by the calculation of the noncharitable distribution amount.
For example, assuming a $100,000 gift to a charitable remainder unitrust to be paid for the beneficiary's life, the following table illustrates the interrelationship of the beneficiary's age and the selected payment percentage:
The Service has privately ruled that a taxpayer would not recognize gain or loss as a result of transferring stock from a qualified plan to a charitable remainder unitrust upon his separation from service.
The trust's market value is calculated anew every year, and that revaluation feature makes the charitable remainder unitrust a terrific charitable vehicle for bullish donors who believe we're at or near the market bottom.
A charitable remainder unitrust (CRUT) is similar to a CRAT, but with a few important differences.
This ruling-which applies if either a Charitable Remainder Annuity Trust or Charitable Remainder Unitrust names the SNT as beneficiary- represented quite a break from prior law which, among other things, required that a CRT's income be used for the trust beneficiary's support-a requirement that would have, in most cases, ended a beneficiary's eligibility for government benefits, such as Supplemental Security Income (SSI) and Medicaid.
There are many types of CRTS, a few of which include; A) charitable remainder annuity trust (CRAT) which pays a fixed dollar amount annually; B) charitable remainder unitrust which pays a fixed percentage of the trust's assets annually; C) charitable pooled income fund which is set up by the charity allowing many donors to contribute.
When the donor is risk-averse and would like to "fix" the payments and, thus, avoid a potential decrease in payments should the market value of the charitable remainder unitrust's (CRUT's) assets decline at some point in the future.
Answer--The annual payout to the noncharitable beneficiary must be at least 5% and not exceed 50% of (a) the initial fair market value of the property contributed to the trust (in the case of a charitable remainder annuity trust), or (b) the net fair market value of the trust's assets determined at least annually (in the case of a charitable remainder unitrust).
The CRT, which be may established during life (inter vivos) or at death (testamentary), comes in 2 basic types: the charitable remainder annuity trust, or CRAT, which pays a fixed dollar amount or a fixed percentage of the initial value of the assets transferred to the trust; and the charitable remainder unitrust, or CRUT, which pays a fixed percentage of the trust's assets valued annually.
Estate planners have several tools and techniques to help clients meet their tax and non-tax planning needs, including the charitable remainder unitrust, or CRUT.
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