What is a Charitable Remainder Unitrust (CRUT)?
Tax and Financial Benefits for Your Clients
- The trust beneficiaries receive regular payments for life, term or years, or both;
- The donor receives a charitable income tax deduction in the year of the gift based on the value of the real estate/complex assets, determined by a qualified appraisal. The cost of the appraisal is paid directly by the donor to the appraiser;
- For gifts of long-term appreciated real estate or complex assets, the annual deduction limit is 30% of the donor’s AGI;
- Unused charitable deductions may be carried over an additional five years; and
- The unitrust sells appreciated assets tax-free – proceeds are reinvested to produce income.
How to Establish a CRUT at INFAITH
- Request a personalized illustration for your client using our online request form, or call 800.365.4172 to speak to a InFaith Gift Planner. To create a customized illustration for your client, we need the following information:
- Client's name, birthdate and tax bracket; and
- Proposed gift amount, including cost basis.
- Review the illustration and other disclosure materials with your client.
- If your client wishes to proceed and establish a unitrust, complete and return the Charitable Remainder Trust Application, IRS Form W-9, Fund Workbook and Complex Gift Asset Questionnaire or Real Estate Questionnaire (depending on the gift).
- Clients 50 or older, but may be younger for a term-of-years trust;
- Clients interested in additional income who can withstand market fluctuations;
- Clients with significant assets;
- Clients interested in converting real estate into a gift that provides a stream of ongoing income;
- Clients who wish to give real estate and bypass associated gains;
- Clients who may wish to make additional gifts to the trust at a later date;
- Clients who are seeking ongoing income for long-term care or wealth replacement insurance premiums; and
- Clients with property they are no longer interested in maintaining.
Payments can be paid to the donor, a relative or friend, and are taxable as income. There may be estate/gift tax consequences if someone other than the donor or the donor’s spouse is named as an income recipient.
More about CRUTs
The gift minimum for real estate is $200,000. The donor can also make multiple additional gifts of cash, securities, and/or real estate to the trust, which would increase the annual unitrust distribution.
Unitrust Payout Rate
In determining a payout rate, InFaith looks to various factors, including the current economy, the prevailing IRS discount rate and the age of the trust income beneficiaries. Once the percentage has been set in the signed trust document, it cannot be changed. The variable annual payment rate is calculated annually, based on the percentage in the trust agreement and the overall value of the trust’s assets. Payments begin in the calendar year following sale of the property/complex gift assets. The donor(s) and certain family members are disqualified from purchasing the property according to law.
Benefits to you, the financial professional
InFaith Community Foundation will support you with a full range of charitable products and services, and you'll be compensated for your efforts by Thrivent or American Funds. (details)