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CRUT: A Charitable Remainder Unitrusts Guide

A CRUT, or Charitable Remainder Unitrust, is a type of Charitable Remainder Trust that typically offers greater returns and distributions than its cousin, the Charitable Remainder Annuity Trust. This guide will explain the basics of Charitable Remainder Unitrusts, dive into the various types of CRUTs and explore an example.

What is a CRUT (Charitable Remainder Unitrust)?

A CRUT is a tax-exempt structure with many tax benefits and, according to Charles Schwab, is well suited for appreciated assets you have not yet sold. In exchange for donating some of the money in the trust to a charity, you can defer the taxes you would otherwise pay when selling an asset and grow your asset tax-free inside the trust. Plus, CRUTs give you an immediate charitable income tax deduction when you put the assets in.

So, how does a CRUT work? It is a form of a tax-deferred account, similar to an IRA, designed to incentivize charitable giving in exchange for 3 significant tax benefits:

  1. Tax deferral: You don’t have to pay taxes on gains realized inside the trust
  2. The ability to lower your tax rate via income smoothing
  3. An upfront charitable deduction: You receive a charitable deduction you can use to reduce your taxes. The charitable deduction is worth at least 10% of the value of the assets you put in the CRUT

How Does a CRUT Work?

Like all Charitable Remainder Trusts, setting up and reaping the benefits from a Charitable Remainder Unitrust is easy:

  • Asset Choice. You, the individual setting up the trust, choose an appreciated asset(s) that you would like to contribute to a trust.
  • Designate who benefits. You choose the person(s) who will receive distributions from the trust every year, they are also known as an income beneficiary.
  • Asset transfer & charitable deduction. After you transfer your chosen assets to the trust, you get an immediate charitable deduction equal to ~10% of the asset(s) you put in.
  • Tax-free sales. You sell your asset and are able to pay no taxes on that sale as the trust is tax exempt.
  • Reinvest the savings. You’ve just saved as much as 50% on your taxes, and you can reinvest those savings and diversify your portfolio simultaneously.
  • Take your annual withdrawal. You are entitled to at least yearly distributions; the amount and control you have on the distribution size depends on the type and length of Charitable Remainder Unitrust you choose (more on these choices below).
  • Leave the remainder to charity. The remainder —whatever remains in the trust at the end of the trust’s term — is donated to a charitable organization that you can choose.
  • Profit. Charitable Remainder Trusts typically result in 50% to 100% greater returns or more when used with appreciated assets, even after the charitable donation.

What Are The Benefits of a Charitable Remainder Unitrust?

A Charitable Remainder Unitrust carries three significant tax benefits.

First, the sale of appreciated assets in a CRUT trust is tax-deferred; you pay no taxes when you sell, and the money you save can be reinvested and continue to grow on a tax-free basis inside the trust. That additional reinvestment can more than double your returns.

Second, selling assets via a Charitable Remainder Unitrust will allow you to achieve “tax smoothing” by spreading your income out over many years to lower your annual income and the effective tax rate you pay on your income.

Third, when you place assets into a unitrust, you will receive an up-front tax deduction worth about 10% of the assets’ value. That’s yours to use in the year you fund your trust (or over the next 5 years)—no matter when you sell the assets. 

What Are The Tradeoffs of Charitable Remainder Unitrusts?

There are a few tradeoffs associated with the CRUT strategy. First, there is a liquidity tradeoff: CRUTs allow you to withdraw a certain percent of trust assets each year, so in the early years of the trust, you are giving up upfront liquidity for greater future wealth.

Most importantly, a CRUT is an irrevocable trust, so you can’t reverse your decision after you’ve funded your trust — though there is some flexibility to make changes or even back out before you’ve placed your assets in the trust.

What is a Unitrust?

A Charitable Remainder Unitrust (or CRUT) is a type of Charitable Remainder Trust alongside a Charitable Remainder Annuity Trust. So how does it compare to a CRAT?

A unitrust is a trust that pays out a fixed percentage of trust assets yearly rather than paying out a fixed amount yearly. The annual distribution of a unitrust is measured as a share of the fair market value of the CRUT assets every year. The amount you receive from the trust will change every year — and, in most cases, it will go up as the trust’s assets grow over time.

If you put $1 million into your Unitrust and choose a 10% payout rate, you’d receive $100,000 in the first year. If your trust investments do well and the trust value grows to $2 million, you would receive 10% of that new value or $200,000. In most cases a CRUT trust allows you to withdraw more money from your trust for your use compared to CRATs for a couple of reasons:

  • Per IRS rules, a unitrust can last much longer than an annuity trust, or it can take a larger annual distribution percentage if set up for the same time period. A longer trust term means more tax-free growth and more distributions for you and your family.
  • You can add assets to a Charitable Remainder Unitrust over time. Not so with a CRAT.
  • CRUTs come in multiple shapes to to suit your needs.
charitable remainder trust
How assets move between you, your Charitable Remainder Trust, and the charitable beneficiary

Comparing Different CRUTs

Let’s assume you’ve decided on a Charitable Remainder Unitrust for its larger annual payouts and greater overall returns. However, there are still two critical decisions to make:

  1. First, which type of CRUT is right for you — a standard, NIMCRUT, or flip CRUT?
  2. How long will your trust last — for a fixed term, your lifetime, or even longer?

Types of Charitable Remainder Unitrust

Withdrawals work differently depending on whether you choose a Standard CRUT, a NIMCRUT, or a Flip CRUT. So what are their key differences?

1. Standard CRUT

With a Standard CRUT, you’ll receive a set percentage of the trust’s assets each year. Because this is a unitrust, you’ll know the rate at the start of the trust, but each years distributions will depend on the value of your trusts assets each year.

Standard CRUTs can be a good fit for customers willing to give up some returns in exchange for relatively predictable, consistent payouts.


With a NIMCRUT, you are owed the same percentage of trust assets yearly as you would from Standard CRUT and you have some ability to defer those distributions to future years. These trusts distribute the lower of the trusts realized income and the percentage of trust assets it owes you. If the realized income is lower than the distribution percentage the trust owes you, any underpayments are rolled over to future years, giving you control over your annual distributions by controlling how much income your trust realizes each.

Although NIMCRUTs carry the highest expected returns, they can only distribute realized gains, so down markets can be a problem. For that reason, a NIMCRUT can be a good fit for those who are set on maximizing total returns, setup their CRUT for a long period and can weather down years.

3. Flip CRUTs

Flip CRUTs ‘flip’ from a NIMCRUT structure to a Standard CRUT structure after a predetermined event, such as the sale of a non-marketable asset or a certain number of years.

They are commonly used if you want consistent distributions but have illiquid assets that won’t be liquid for a while. With a Standard CRUT the trust may be forced to liquidate or distribute illiquid assets due to its forced distributions. Flip CRUTs also work for those who want to defer distributions for some time and then switch to the consistent, predictable distributions of a Standard Charitable Remainder Unitrust — for example, if you are planning for a period of growth and then will need retirement income.

Charitable remainder unitrust
Choosing which of the three Charitable Remainder Trusts makes sense for you depends on your goals, risk appetite, and timeline.

How Long Can You Set Up a CRUT For?

A Charitable Remainder Unitrust can last for a fixed period (between 1 and 20 years), for one life, or for even longer – say, your lifetime and your partner’s, or your lifetime plus a set period of years after that for your family to draw other distributions.

Term trusts may be easier for some people to commit to due to their shorter and predictable length compared to lifetime trusts that last a lifetime. While lifetime trusts have several advantages:

  • Higher return on investment. CRUTs allow you to defer your taxes and earn returns on the savings. Generally the longer your trust lasts the more significant the gains from a CRUT are.
  • Flexibility in investments: With a term CRUT, your investment time horizon is limited: Whatever you invest in has to pay off within the length of the trust. With a lifetime trust, you can invest in illiquid assets with long time horizons – such as alternative asset classes that could be illiquid for a decade or longer.

A Charitable Remainder Unitrust Example

CRUTs are valuable structures for people who haven’t sold their assets yet. Take Annie, age 30, who joined a successful Bay Area startup at a relatively early stage. The company recently completed its IPO. Annie exercised her shares for a total cost of around $50,000, and she’ll be able to sell at a significant markup: $5 million.

By setting up a CRUT trust, Annie will receive a charitable income tax deduction of approximately 10% of the current value of her shares, or $500,000. Also, she’ll save about $1.6 million in taxes when she sells her shares, allowing her to reinvest those savings and create more wealth for herself. And Annie will be able to withdraw as much as 11% of her assets from the trust yearly, depending on whether she chooses a term trust or one that lasts for her lifetime or longer.

What would all of this mean for Annie’s bottom line?  If she has her money in a Lifetime Charitable Remainder Trust, she’ll end up with about $19.6 million in total payouts. It would have been about $8.7 million had she not used a CRUT and sold her equity in a regular taxable account. From using the CRUT, Annie is able to take home an extra $10.9 million, even after making a large donation to charity. Not a bad outcome for what amounts to a simple tax planning exercise!

If you want to read this example in more depth you can do so here.

Next Steps

You’ve read up on the basics of a CRUT, and now you know more about the Charitable Remainder Unitrust rules. If you’re interested in going deeper still, then, access our calculator to evaluate the potential return on investment given your situation, or schedule a meeting with us.

About Valur

We have built a platform to give everyone access to the tax planning tools of the ultra-rich like Mark Zuckerberg (Facebook founder), Phil Knight (Nike founder), and others. Valur makes it simple and seamless for our customers to utilize the tax-advantaged structures that are otherwise expensive and inaccessible to build their wealth more efficiently. From picking the best strategy to taking care of all the setup and ongoing overhead, we make it easy.