The Two Types of Charitable Remainder Trusts and How They DifferShare this post
Charitable Remainder Trusts and How They Differ
The two basic types of the charitable remainder trusts are the Charitable Remainder Annuity Trust (CRAT) and the Charitable Remainder UniTrust (CRUT). Both the CRAT and the CRUT are irrevocable trusts. Irrevocable trusts provide for an annual payment to a non-charitable beneficiary or beneficiaries (usually including the trust maker or the trust maker’s spouse). It also includes the remainder of the trust property distributed to the charity upon the death of the last income beneficiary.
Charitable Remainder Trust Types: CRAT
With the CRAT, a fixed dollar amount or percentage of the initial value of the trust assets is paid to the non-charitable beneficiary annually. The payment to the income beneficiary remains level for the entire term of the CRAT. Also, a CRAT may receive only on contribution. No additional property may be added to the trust. This type of trust is most appropriate for older donors who require a steady income and are not worried about future inflation.
Charitable Remainder Trust Types: CRUT
With the CRUT, a fixed percentage of the value of the trust assets is paid to the non-charitable beneficiary annually. The Trust assets are revalued annually This type of trust allows the amount of the distributions to the income beneficiaries to fluctuate each year. It is based on the annual value of the trust. Furthermore, CRUTs allow for additional contributions of property after the initial contribution.
What is a NIMCRUT?
NIMCRUT stands for Net Income with Make-up Charitable Remainder Unitrust. It is a variant of the standard charitable remainder unitrust (CRUT). This variant still provides for distribution of a certain percentage of the trust’s asset to the non-charitable beneficiary. However, the NIMCRUT provides that if the trust’s income for the year is less than the specified distribution percentage, the non-charitable beneficiary will receive only an amount equal to the actual annual income. The good news is that if the trust’s income in future years exceeds the specified distribution amount, the trust will “make up” the shortfall in previous years’ payments.