St. Paul is a city full of charitable givers who want to lend a helping hand for a variety of reasons. A woman may want to donate money to Susan G. Komen for the Cure after battling breast cancer. A man may want to give money to the American Red Cross after seeing the devastation a tornado can cause. Or a former student may want to leave money to the MIAC school that gave them an education and an experience.
Whatever the reason, those who donate want to make the most of the money that they can give. A charitable remainder unitrust or CRUT is one tool that can help in this effort -- and even give the donor a little tax break of their own.
Take a situation where an individual owns stock, the value of which the owner would like to donate to a charity. The individual could sell the stock, pay a tax on whatever gain there may be and then leave the rest to a charity. While this is certainly an option, most people would rather avoid forcibly donating the portion to the Internal Revenue Service.
Instead, an individual can transfer the stock into a CRUT. From the date that it is created, the trust must pay out a set percentage of income to at least one beneficiary that is not a charity. The individual can then actually take an income tax deduction based on the fair market value of the trust assets and the annual payout rate. When the individual dies and the trust sells the assets, no taxes need by paid by the trust.
Of course, as with any estate planning tool, it should not be utilized without the advice and assistance of an experienced estate planning attorney. Why? In some cases, there are consequences that an individual may want to avoid.
In the case of CRUTs, once assets are transferred into the trust the person who transferred them gives up control. This means that the assets cannot be accessed for personal use should an unexpected financial hardship present itself later in life.
Source: The Salt Lake Tribune, "Jason: A deeper look into CRUTs," Julie Jason King, July 29, 2013