Overview
Irrevocable, tax-exempt trust
Generates income for beneficiaries
Provides charitable donation
Reduces taxable income
Avoids capital gains taxes
Immediate partial income tax deduction
Estate planning tool
How it Works
Donor transfers assets to trust (cash, artwork, stocks, bonds, etc.)
Income distribution to beneficiaries (5-50% of fair market value)
Payout schedule (monthly, quarterly, semi-annually, annually)
Remainder to charity at specified time
Can add more assets to trust
Secure 2.0 Act allows one-time qualified charitable distribution (QCD) from IRA to fund CRUT
Types of CRUTs
Standard Unitrust: Fixed percentage income distribution
Net Income Unitrust: Lower of fixed percentage or net income
Flip Unitrust: Starts as net income, converts to standard unitrust on specified date
Pros and Cons
Pros
No capital gains taxes on asset sales
Federal and state income tax deductions
Immediate partial income tax deduction
Income stream for beneficiaries
Charitable donation
Cons
Required payments to beneficiaries
High-value assets needed
Irrevocable
Complexities
Benefits and Considerations
Generates income and charitable donation
Assets for funding: real estate, stocks, bonds, cash, publicly traded securities
Donation amount depends on income payout percentage
Consult tax professional before establishing CRUT
Understand Secure 2.0 provisions for QCD funding
CRUT vs. CRAT
Charitable Remainder Unitrust (CRUT) and Charitable Remainder Annuity Trust (CRAT) are similar in that they both are irrevocable trusts that provide income to beneficiaries for a specified period and then transfer the remaining assets to charity. However, they differ in how the income is distributed:
CRUT (Charitable Remainder Unitrust)
Income: Pays out a fixed percentage of the trust's fair market value each year. This percentage is determined when the trust is created and remains constant.
Flexibility: Allows for additional contributions to the trust after it is established.
Income fluctuation: The annual payout can fluctuate based on the trust's asset performance.
CRAT (Charitable Remainder Annuity Trust)
Income: Pays out a fixed dollar amount each year. This amount is determined when the trust is created and remains constant throughout the trust's term.
Flexibility: Does not allow for additional contributions to the trust after it is established.
Income stability: The annual payout remains the same regardless of the trust's asset performance.
In summary:
A CRUT offers a potentially higher income stream if the trust assets appreciate, but the income is less predictable.
A CRAT provides a more stable income stream but does not allow for additional contributions.
The best choice between a CRUT and a CRAT depends on your specific financial goals and risk tolerance.
Disclosures
Bloomwood does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.
We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.
For additional information about Bloomwood, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability, or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Bloomwood is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Bloomwood and its representatives are properly licensed or exempt from licensure. 730 Starlight Lane, Atlanta, GA 30342.
Comentários