Question

Advantages of a charitable remainder uni-trust (CRUT) include a(n):

a. fixed annual dollar amount pay-out for life.
b. income pay-out of at least 5% of the fair market value of the trust as revalued each year.
c. ability to accumulate all income for pay-out in a lower income tax bracket year.
d. ability to distribute tax exempt income prior to capital gains.

Answer 1

The main advantage of a CRUT is the income payout based on a percentage of the trust's revalued fair market value each year, capable of increasing if the asset values rise.

Step-by-step explanation:

The advantages of a charitable remainder uni-trust (CRUT) include a flexible income payout that adapts to the changing value of the trust's assets. Specifically, the benefit is an income payout of at least 5% of the fair market value of the trust as revalued each year. This allows for the possibility of increasing income if the value of the assets within the CRUT appreciates over time.

Unlike a fixed annuity trust, which provides a fixed dollar amount each year, a CRUT's payout fluctuates with the market value of the assets within the trust, which can help safeguard against inflation and provide a potential for increased income. The terms of the CRUT are usually irrevocable upon the grantor’s death, and at that point, the assets are managed and distributed according to the deceased's directives laid out in the trust.