Types of CRUT: What’s The Difference?

We offer three types of Charitable Remainder Trust: Standard CRUTs, NIMCRUTs, and Flip CRUTs. Although everyone’s preferences and circumstances are different, Standard CRUTs can be a good fit for customers who are willing to give up some returns in exchange for relatively predictable, consistent payouts; NIMCRUTs typically maximize total returns; and Flip CRUTs generally work best for illiquid assets that won’t pay out for awhile.

As the Biden Administration and Congress work together to raise revenue by ending several long-standing tax- and estate-planning strategies, one common tool has remained untouched, and — good news! — it’s a tool that is a fit for many: the Charitable Remainder Trust.

There’s still plenty that can happen before any of the proposed provisions becomes law. (Cue the collective memory of Schoolhouse Rock, at least for people of a certain age.) Still, given the potentially renewed importance of these trusts, we thought it was time to go back to basics. In today’s post, we’ll offer a simple overview of the various types of Charitable Remainder Unitrusts (CRUTs) Valur offers, with examples and a few thoughts on why you might use each one.

There Are Different Types of CRUTs?

There are! In fact, there are three main versions:

  • The Standard Charitable Remainder Trust (CRUT)
  • The Net Income With Makeup Charitable Remainder Unitrust (NIMCRUT)
  • The Flip Charitable Remainder Unitrust (Flip CRUT)


The primary difference between these trusts is in how and when you receive distributions/payouts from the trust. We’ll get to that key distinction, but first, it’s important to understand the features they have in common:

  • The key: Tax-exempt status. This is the big one, and likely the reason you’ve read this far. All of the Charitable Remainder Unitrusts we offer are tax exempt, which means that neither you nor the trust will pay federal or state income taxes on your capital gains (except in a few very rare circumstances) as long as the money stays in the trust. Instead, you pay taxes only when you receive your distributions similar to an IRA.
  • These are “irrevocable trusts.” This is a term of art, but it means what you think it means: These trusts cannot be modified (except in a few narrow cases) after they are created
  • There are two lengths available. Each of these trusts can last for a defined period of up to 20 years (a “term CRUT”) or for the lifetime(s) of a single or multiple beneficiaries (a “lifetime CRUT”)
  • You aren’t the only beneficiary. All Charitable Remainder Unitrusts are what’s called “split-interest trusts.” This means that there are two beneficiaries, and each has an interest in the trust’s assets. In the case of the trusts we’re discussing today, there is always an “income beneficiary” who receives payments from the trust during its term (usually the person who puts assets into the trust) and a “remainder beneficiary” (a charity or donor advised fund chosen by the grantor) that receives whatever is left in the trust at the end of its term


The most important distinction for most people is that with a standard CRUT, you will receive a payout that is a set percentage of trust assets each year.  That percentage is determined at the start of the trust based on its expected length, and it doesn’t change during the trust’s term. This means that once you put your assets into the trust and establish that payout percentage, you’ll receive those payouts no matter what.

Here’s a simple example: Suppose that you had $1 million in a Standard CRUT with a 20-year term. Given prevailing IRS interest rates, the payout percentage would be about 11%. At the end of the first year, the trust would owe you $110,000 (11% of $1 million). If, over the following year, the trust assets are now worth $2 million, the trust would pay you $220,000 (11% of $2 million). Notably, this means that you have no control over when the trust pays you out, so you can’t make the decision to further defer your payouts to take advantage of continued compounding in this tax-exempt structure.

Key Concepts

A NIMCRUT (Net Income with Make-up Charitable Remainder Unitrust) is in many ways very similar to a Standard CRUT, with one notable exception: With a NIMCRUT, although you are still entitled to the annual amount outlined in the standard CRUT (payout rate x trust assets), you will only receive the trust’s income from that year, up to that distribution limit. In other words, if the trust doesn’t have enough income to pay out the fixed percentage of the trust’s assets, you’ll only receive whatever income the trust does have.

But what happens to the amount that you’re entitled to, but that you don’t receive in a given year? It doesn’t just disappear — any amount that you are not paid out will be available to you in future years. (That’s the “make-up” part of the NIMCRUT, and it’s kind of like an account receivable that you can draw on in the future).

A quick example to illustrate this: Say you put $250,000 of assets into a trust with a 10% payout rate, and they grow to be worth $1,000,000 by the end of the first year. Suppose the assets don’t grow (and you don’t sell assets or receive any income) for the next 3 years after that. You were entitled to $100,000 per year, or $300,000 total, so the difference — that extra $300,000 — goes into your “makeup account.” Then, in year 4, you’re entitled to another $100,000, and this time you decide to sell all of the assets, realizing $750,000 of capital gains. Because the trust now has the income available, you are required to take that $400,000 distribution that had accumulated in the make-up account over 4 years.

In contrast, a Flip CRUT is a hybrid of the two basic approaches. It starts as a NIMCRUT (with the associated rules about income and make-up provisions), and it “flips” to a standard CRUT after a predetermined triggering event — the sale of an illiquid asset, for example, or hitting a certain date. After that “flip” happens, you’ll start receiving a set percentage of trust assets, just as you would in a Standard CRUT.

When Is Each Type of CRUT A Good Idea?

Types of CRUT
Types of CRUT

Standard CRUT. Because Standard CRUTs pay out a steady share of the trust’s assets every year, they tend to have slightly lower returns than NIMCRUTs. This makes sense, since forcing annual payouts means your money has less time to grow and compound tax free. At the same time, because a Standard CRUT’s payouts don’t depend on the trust having capital gains income, some people use this type of trust for volatile assets that may not end up growing significantly.

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 some returns in exchange for relatively predictable, consistent payouts and those who want to hedge against the risk that their assets won’t grow much (or will even diminish) in value.

NIMCRUT. At first, it might seem like NIMCRUTs are more constraining than Standard CRUTs. After all, you have to meet an additional requirement before you can withdraw your money: Your trust has to realize capital gains income.

But it turns out that this additional requirement is really an opportunity. Imagine that, like Annie, you don’t need to withdraw money from your trust in a given year — maybe your regular salary covers your needs, or you have money coming from other sources. With a Standard CRUT, you’re stuck: You have to withdraw the set payout percentage no matter what. With a NIMCRUT, by contrast, you can defer your payouts by choosing not to realize any income inside the trust. How? Your trust will only realize income when you sell assets; if you don’t sell, there’s no income (except for dividends, which will be minimal in most cases), so the trust won’t pay you anything.

Instead, the shortfall — the amount your trust owes you but doesn’t pay you — will go into your make-up account. You can draw on that account when you’re ready by selling assets and realizing income. In the meantime, though, you can leave the money in your trust, and it will continue to compound tax free. As a result, on average, a Lifetime NIMCRUT might see as much as 30-50% greater payouts than a Standard CRUT (though it’s important to remember that even a Standard CRUT can deliver better returns in many circumstances than a strategy without tax planning on a net present value basis).

Flip CRUT. The most common use case for a Flip CRUT is when the user wants the benefits of a standard CRUT — predictability of payouts and that hedge against losses — but the trust is funded with an illiquid asset (say, startup equity) that can’t be sold to satisfy the set annual payout until an exit event (like an IPO, for example). The trust will act like a NIMCRUT, paying out nothing until the IPO because there’s no trust income, and then it flips to a Standard CRUT and begins paying that fixed percentage of trust assets after the IPO, now that the shares can be sold for cash.

How does the payout between CRTs compare?

Let’s see how the different trusts payout methodologies would work in a typical situation. We’ll revisit Annie, who we covered in an earlier post. Annie is an Engineering Manager at Coinbase, and she’s going to receive a major windfall when she sells her newly public equity. For the sake of this example, let’s assume that Annie has already decided she wants a term trust but wants to see the payouts for each type.

Annie’s stock has the following characteristics:

  • Cost basis: $50,000
  • Current value: $2,500,000
  • Expected value at sale: $5,000,000

Everyone’s cash needs are different, but Annie wants an immediate payout in Year 1 — to pay off student loans, buy a car, whatever — and a smaller amount in Year 5 for a down payment on her dream home. Both trust options offer her available cash to suit her needs. In Year 1, she requests a payout of $600,000. If she uses a Standard CRUT, she’ll receive $550,300, which is the payout percentage (here, about 11%) times the trust’s value at the end of the year ($5,000,000). She’d be able to pull the same amount out of the NIMCRUT. The NIMCRUT and the Standard CRUT look the same in Year 1 because, since Annie sold her Coinbase stock, the NIMCRUT has enough income to cover almost the full amount she wants to withdraw.

In Years 2-4, however, the payouts differ significantly. This is because of the NIMCRUT’s income requirements. As we’ve mentioned, a NIMCRUT pays out the lower of the required payout and the trust’s realized income. Because Annie doesn’t want any income this year, she doesn’t sell any assets so she doesn’t realize any income (though we have assumed some dividends each year, which is why the NIMCRUT has a small payout each year, even where Annie hasn’t asked for one).

In Year 5, the NIMCRUT pays out exactly the amount Annie requests, because it has enough in income plus her make-up account to cover it. (The payout could be higher if requested, up to a maximum of $1,340,000.) The standard CRUT continues to pay out its required annual payment, a fixed percent of the trust’s assets, accounting for growth over the years.

Next Steps

If you want to know more about CRUTs, check out our in-depth article on the different lengths you can set up for your CRT. Use our calculator to evaluate the potential return on investment given your situation. And if you have any questions, contact us through our chat button below, or set 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 take care of it and make it easy.