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NIMCRUT: What Is It and How Does It Work?

❗ Key Takeaway: Deferring payouts with a NIMCRUT allows you to put off taxes for longer and leads to greater returns, by capturing the benefits of additional compounding.

What is a NIMCRUT? How can you work with them effectively? These questions might have popped into your mind while researching your CRUTs options.

Last time, we kicked off our Fundamentals of Charitable Remainder Trusts series, where we break down each of the main types of CRUTs, with our review on the standard CRUT— the simplest Charitable Remainder Unitrust structure. Today, we’ll highlight a slightly more advanced tool: the net income with make up charitable remainder unitrust, or NIMCRUT.


The NIMCRUT definition is very similar to a standard Charitable Remainder Unitrust (CRUT), with one notable exception. With a standard CRUT, you receive a fixed percentage of the trust’s value as a payout every year, regardless of whether the trust’s assets grow or shrink in value or have any income. With a NIMCRUT or make-up Charitable Remainder Unitrust, although you are still entitled to that amount every year, you will only receive the trust’s income from the year up to that distribution limit.

In other words, a NIMCRUT pays you the lower of the trust’s net income or the standard payout. And the amount you’ll receive every year will be a fixed percentage of the initial value.

Practically, this means that if the trust doesn’t have enough income to pay out the fixed percentage of the trust’s assets that it owes you, you’ll only receive whatever income the Charitable Remainder Trust has. And if there’s a shortfall — if the trust doesn’t have enough net income to pay the whole amount it owes you, the difference carries over to future years.

That’s where the “make-up” in Net Income with Makeup Charitable Remainder Unitrust comes from. It’s kind of like an account receivable that you can Why is this distinction important for understanding the NIMCRUT term? Because you can use the make-up account to defer your distributions and allow your money to grow tax-free for longer in the make-up Charitable Remainder Unitrust and create more wealth for yourself due to the power of compound remainder interest.

Why is this distinction important for understanding the NIMCRUT term? Because you can use the make-up account to defer your distributions and allow your money to grow tax free for longer in the Charitable Remainder Unitrust and create more wealth for yourself due to the power of compound interest. Let us explain.

How Do NIMCRUT Distributions Work?

These steps likely look familiar. That’s because NIMCRUT’s distributions are almost exactly the same as the standard Charitable Remainder Unitrust, except for the additional flexibility on the annual withdrawal.

Here’re the major differences between NIMCRUT vs. CRUT, as well as the steps you should follow to set it up.

1. Starts like a Standard Charitable Remainder Unitrust

Like with any CRUT, you will likely choose an asset that is highly appreciated or is likely to appreciate significantly. Next, you’ll designate an income beneficiary — the person who will receive the annual distributions from the NIMCRUT trust; this is usually you or a family member. After that, you’ll transfer your assets into the trust and claim your net income tax deduction, which is typically equal to about 10% of the starting value of the assets. And then — voila — you get to sell your asset and, pay no taxes on that sale, allowing you to grow more money faster due to the magic of compound remainder interest and pre-tax investing.

2. Determine how much you want to withdraw

This is where the NIMCRUT and CRUT start to differ from the income beneficiary, and the strategy starts to come in. With a NIMCRUT distribution, the trust only distributes the trust income. You have some power to control your withdrawal amount (to the extent you can control realizing gain)

3. Take your annual withdrawal

So you’ve decided you’d like a distribution. What now? The trust has to realize income by selling an asset; otherwise it won’t have the income to meet your withdrawal needs.

4. Leave the remainder to charity

 The remainder —whatever is left in the trust at the end of the make-up charitable remainder unitrust term — is donated to a charitable organization, after being distributed to the trust income beneficiary. Recall that this is the reason your money gets to grow tax-free in the first place: You get to grow assets in a tax-exempt structure through a NIMCRUT, and in exchange, you promise to leave the remainder to another tax-exempt entity — a charity.

What are the Benefits of a NIMCRUTs Distribution Strategy?

The key benefit of the NIMCRUT — and the reason most of our customers choose to use this structure over other Charitable Remainder Trust options— is the chance to control your annual distributions, grow your money tax-free for longer, and, as a result, create greater gains over the long term from NIMCRUT trust assets.

But how do you gain control over a NIMCRUT and how do you put it into practice?

Because a NIMCRUT can only make distributions when you realize income, the simplest way to control your distributions is to minimize the trust’s income in years when you don’t want a payout. You can do this in several ways, but the most common are:

  1. Invest in a diverse set of assets that don’t typically pay out dividends
  2. Choose to sell those assets, and realize income, only once you’re ready to cash money out of the trust.

And why would you opt to receive less money from your trust in a given year? Is that money gone forever? Nope! This is where the NIMCRUT’s “make-up provision” comes into play. No matter what kind of CRUT you choose, you’ll be owed a distribution each year. With a NIMCRUT, if you do not receive a given amount of distributions in a year, you can make up those distributions in future years, when the trust has enough income to cover the payouts (because you chose to realize the trust income when you are ready to take it.)

So you can defer your payouts in a NIMCRUT. 


Let’s analyze a NIMCRUT example in detail. Annie lives in the Bay Area and joined Coinbase around the time of the company’s Series C round. Her shares—all exercised for a total cost of around $50,000—are valued at around $2,500,000.

If she just sells her shares, Annie will owe the federal government about $550,000 in taxes on her capital gains, and she’ll owe California another $285,000, for a total tax bill of $835,000. That number is too big to stomach, so Annie chooses a NIMCRUT to prepare her tax planning. Let’s jump into how her numbers work out.

Available NIMCRUT Withdrawals

  • Cost basis: $50,000
  • Exit value: $2,500,000
  • Charitable deduction: $250,000 or expected $120,000 tax savings (based on her 48% ordinary tax rate)
  • Immediate tax savings on sale: $835,000.

There are many ways to get liquidity out of a CRT, and we discuss them in some depth. But the simplest answer for this NIMCRUT example -due to its structure- Annie (and you) will have access to a growing share of money every year, starting as soon as she reaches her liquidity event. (For a term trust, it’ll be around 11%; for a lifetime trust, it depends on her age, but it’ll be right around 6%).

In her first five years Annie should be able to withdraw about $1 million dollars assuming an 8% annual growth rate, or about $2.3 million in 10 years!

Total NIMCRUT Tax Returns

What would all of these tax savings, investment gains, and withdrawals mean for Annie’s bottom line on this example? After, say, 40 years, and pulling out 20% of her assets every 5 years, Annie will end up with about $12.5 million in after tax total payouts or $8m more than if she hadn’t used a NIMCRUT (all while giving $5.7 million to charity).

In other words, even after making what can only be described as a very generous donation to charity, Annie still pockets an extra $8 million, all because she put her Coinbase shares into a NIMCRUT before she sold them. To see your own potential returns you can use our customizable calculator here.


Next Steps

Controlled withdrawals, greater returns. Each of these trusts is designed to defer taxes and, ultimately, to leave you with more money to invest for long-term growth. That’s why Charles Schwab’s Charitable Strategies Group calls CRUTs “particularly suited for highly appreciated assets.” And things get even better with NIMCRUTs.

With this structure, you have greater flexibility to decide when you realize income as an income beneficiary. By delaying your distributions, NIMCRUT’s assets can compound for longer tax-free. As a result, you might see as much as 30-40% greater payouts than you would with a standard CRUT.

In short, although everyone’s preferences and circumstances are different, this structure can be a good fit for customers who are willing to give up predictable, consistent payouts in search of greater returns. Reach out to us for a meeting, and we will help you understand this topic more in-depth.

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 take care of it and make it easy.