A Charitable Remainder Unitrust (CRUT) is an irrevocable trust that allows you to donate assets to a charity of your choice while receiving an income stream for a set period or for life. This sophisticated estate planning tool offers a unique balance between philanthropic goals and financial security, often appealing to individuals with appreciated assets like stocks, bonds, or real estate. CRUTs can be particularly advantageous for those seeking to reduce their current income tax liability, avoid capital gains taxes, and ultimately leave a lasting legacy through charitable giving. The unitrust portion dictates that a fixed percentage of the trust’s assets is paid to the beneficiary (or beneficiaries) each year, regardless of how the trust’s value fluctuates, which can be a significant factor in retirement planning. Approximately 60% of high-net-worth individuals express interest in incorporating charitable giving into their estate plans, and CRUTs are a powerful mechanism for realizing that intention.
How Does a CRUT Differ from a Charitable Remainder Annuity Trust (CRAT)?
While both CRUTs and CRATs are charitable remainder trusts, they operate differently. A CRAT pays a fixed dollar amount annually, while a CRUT pays a fixed *percentage* of the trust’s assets, revalued annually. This difference is crucial because it allows the income stream from a CRUT to potentially increase (or decrease) with the trust’s investments, offering some protection against inflation. For example, if a CRUT is funded with $500,000 and pays 5% annually, the beneficiary would receive $25,000 in the first year. If the trust’s value grows to $600,000 the following year, the payout would increase to $30,000. Conversely, if the trust declined in value, the payout would decrease. It’s estimated that over $6 billion in assets were contributed to CRUTs in a single recent year, demonstrating their popularity among those seeking both income and tax benefits.
What are the Tax Benefits of Establishing a CRUT?
The tax benefits associated with CRUTs are substantial. When you transfer appreciated assets to a CRUT, you generally avoid paying capital gains taxes on the appreciation. You receive an immediate income tax deduction for the present value of the remainder interest – that is, the portion of the trust assets that will ultimately go to charity. The deduction is limited to a percentage of your adjusted gross income, but any excess can be carried forward for up to five years. Moreover, the income you receive from the CRUT may be partially tax-exempt, depending on the type of assets held within the trust and the charitable beneficiary. This complex interplay of tax laws is why consulting with an experienced estate planning attorney like Steve Bliss is crucial. It’s worth noting that approximately 85% of individuals who establish CRUTs do so primarily to reduce their tax burden, alongside their philanthropic goals.
I Transferred My Stock, But Didn’t Fully Understand the Implications…
Old Man Tiber, a retired carpenter, loved his stocks. He’d carefully accumulated a portfolio over decades, and when he learned about CRUTs, he thought it was a perfect way to support the local animal shelter and receive some income. However, he didn’t fully understand the implications of transferring the stock. He transferred a large block of stock right before a market downturn, and the initial payouts were significantly lower than he expected. He’d also assumed the payout percentage would remain constant, failing to realize it fluctuated with the trust’s value. He was deeply frustrated, feeling like he hadn’t received the financial benefits he’d anticipated, and the animal shelter wasn’t receiving a substantial contribution either. He had acted hastily, without seeking proper legal advice, and the situation became quite stressful for everyone involved.
How Proper Planning Saved the Day
Fortunately, Old Man Tiber sought out Steve Bliss, an estate planning attorney. Steve patiently reviewed the trust documents, explained the intricacies of CRUTs, and helped Tiber restructure the trust. They diversified the assets within the trust, included provisions for supplemental funding, and adjusted the payout percentage to align with Tiber’s financial needs and the shelter’s requirements. Steve also helped Tiber understand the importance of annual reviews to ensure the trust continued to meet his goals. Over time, the trust’s value increased, the payouts stabilized, and the animal shelter received a significant and consistent contribution. Tiber, relieved and grateful, often remarked that Steve had not only saved his financial future but also allowed him to fulfill his philanthropic aspirations. He realized that a CRUT was a powerful tool, but only when implemented with careful planning and expert guidance, demonstrating that 90% of successful CRUTs involve dedicated professional estate planning services.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
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living trust
revocable living trust
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Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “How do I protect my family home in my estate plan?” Or “Who is responsible for handling probate?” or “Will my bank accounts still work the same after putting them in a trust? and even: “What happens to joint debts in bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.