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Simple English definitions for legal terms
charitable remainder unitrust
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A quick definition of charitable remainder unitrust:
A charitable remainder unitrust (CRUT) is a special type of trust that allows someone to give money or assets to a charity while still receiving income from those assets for a certain amount of time. This type of trust can also provide tax benefits for the person creating it. The amount of income received is based on a percentage of the trust's assets or income, and federal laws require that at least 5% of the trust's assets be given to the beneficiary each year. Additionally, at least 10% of the original assets must be given to the charity. Unlike other types of trusts, CRUTs allow the person creating it to add more money to the trust after it has been established.
A more thorough explanation:
A Charitable Remainder Unitrust (CRUT) is a type of trust that allows a person to donate assets to a charity while still receiving income from those assets for a certain amount of time. This type of trust can provide tax benefits for the donor.
For example, let's say John wants to donate $100,000 to a charity but also wants to receive income from that money for the next 10 years. John can create a CRUT and transfer the $100,000 to the trust. The trust will then invest the money and pay John a percentage of the trust's assets or income each year for 10 years. After 10 years, the remaining assets in the trust will be given to the charity.
It's important to note that federal laws require the yearly percentage to be at least 5% for CRUT incomes based on the trust's assets. Additionally, CRUTs must leave at least 10% of the original assets of the trust to be given to the charity.
Another type of charitable remainder trust is the Charitable Remainder Annuity Trust (CRAT), which gives a fixed percentage of the trust's assets to the beneficiary every year and cannot receive more contributions after the trust is formed.