Money Matters: CRUT

Money Matters

Last week we talked about a CRAT, a Charitable Remainder Annuity Trust. Today we're going to talk about a CRUT. A CRUT is a Charitable Remainder Unitrust.

You got to love that terminology. I think it's its big brother. A Charitable Remainder Annuity Trust, we talked about last week. What a CRUT is, or a Charitable Remainder Unitrust is very, very similar. And what it is is an irrevocable trust you set up for a charity. So, you gift highly appreciated assets generally to a charity and they, in exchange, pay you back an income, for up to twenty years. The big difference is on a Charitable Remainder Annuity Trust is it's a fixed amount. Let's say I gifted $100,000 and they're going to pay me $5,000 a year for the next up to 20 years. With a Unitrust, you're taking out a fixed percentage. So, let's say that money's invested. So, one year it's $100,000, the next year its $150,000 or $175,000. So, you're taking out a percentage. Let's say it's 5% a year that number can vary in what comes out to me. So that's the big difference.

So, if you're a person looking to do a CRAT or a CRUT, what quick advice do you give somebody?

That's a great question and kind of a tough one. I think the bottom line is there's a little bit more risk or there can be with a CRUT. Because you don't know what the value is going to be. There's actually a stipulation you put in there where you can just do the net income. Lets say you invested, you wanted 5% but you invested in the market and the thing was under water you can actually take less and take net income and then flip it later . So, there's probably a little but more risk with the CRUT, the Charitable Remainder Unitrust but, there's higher potential upside too. Where your income can actually be higher.

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