Charitable remainder unitrusts (CRUT) allow grantors to create tax beneficial trusts which continue to generate income for a specific amount of time, then transfer the assets to a charity. These trusts create tax benefits by allowing the grantor to defer capital gains taxes on the assets and possibly receive a tax deduction after its creation. CRUTs give the donor or the donor’s chosen beneficiary income based upon a percentage of the trust's assets or a percentage of the trust’s income. Federal laws require the yearly percentage to be 5% or more for CRUT incomes based upon the trust’s assets. Also, CRUTs must leave at least 10% of the original assets of the trust to be given to the charity. CRUTs allow the grantor to contribute more income to the trust should they choose after its creation. Charitable remainder annuity trusts (CRAT) give a fixed percentage of the trust’s assets to the beneficiary every year and cannot receive more contributions after the trust is formed.
[Last updated in November of 2021 by the Wex Definitions Team]