Estimated read time: 4 min
For donors who want to support a charitable cause while generating an income stream that may grow with the trust over time, the Charitable Remainder Unitrust (CRUT) offers one of the most flexible charitable planning structures available. A CRUT may produce an upfront federal income tax charitable deduction, defer or eliminate capital gains tax on appreciated assets contributed to the trust, and provide the donor with annual payments that adjust based on the trust’s value.
What a CRUT Is
A CRUT is an irrevocable trust the donor establishes during life, contributing assets such as appreciated stock, real estate, or other property. The trust pays the donor (or another non-charitable beneficiary) a fixed percentage of the trust’s annual value each year. At the end of the trust term (up to 20 years, or the life of the income beneficiary), whatever remains passes to one or more qualified charities.
The “unitrust” feature distinguishes the CRUT from a CRAT: the payment is a percentage of trust value, recalculated annually, so it grows when the trust grows and shrinks when the trust shrinks.
A Broad Overview
The donor receives a federal income tax charitable deduction in the year of funding, calculated as the present value of the projected gift to charity. Because the CRUT is itself a tax-exempt entity, the trust may sell appreciated assets without recognizing capital gains tax at sale. The donor then receives unitrust payments over the trust term, with the dollar amount varying based on trust value.
At the end of the term, the remainder passes to the named charity. The variable payment structure gives the donor exposure to investment performance: better performance produces larger payments and a larger eventual gift.
When a CRUT Fits a Donor
A CRUT may fit well when:
- The donor wants income that may grow with the trust rather than a fixed dollar amount
- The donor holds appreciated assets and would face significant capital gains tax on a sale
- The donor wants a meaningful federal income tax charitable deduction
- The donor is comfortable with payments that vary year to year based on trust performance
- The donor has a clear charitable intent and wants to support a specific cause
A Simple Illustration
A donor in 2026 contributes $1 million of appreciated stock (original investment $200,000) to a CRUT with a 5% unitrust rate and a 20-year term, naming a public charity as remainder beneficiary.
The trust sells the stock without capital gains tax because of its tax-exempt status. The donor receives an income tax charitable deduction in the year of funding, calculated based on the present value of the projected remainder.
In year one, the donor receives $50,000 (5% of $1 million). In year ten, if the trust has grown to $1.5 million, the donor receives $75,000. In a year when the trust drops to $900,000, the donor receives $45,000. At year 20, whatever remains passes to charity.
The above is a hypothetical example provided for illustrative purposes only and not indicative of
any specific investment product.
Strengths and Trade-offs
The strengths are meaningful. A CRUT may produce a substantial upfront charitable deduction, defer or eliminate capital gains tax on appreciated assets, provide income that grows with the trust, and support a charitable cause. Donors who expect long-term investment growth may benefit from the variable payment.
The trade-offs are real. The trust is irrevocable; once funded, the donor cannot reclaim the assets. Payments vary year to year, which may make budgeting more difficult than a CRAT. If the trust performs poorly, payments shrink along with the trust. The 10% remainder requirement must be met at funding: the present value of the projected remainder must equal at least 10% of the contribution, limiting payout rate and term length. The One Big Beautiful Bill Act of 2025 (OBBBA) 2026 charitable deduction limits also apply, including the 0.5% AGI floor and the 35% effective cap for 37%-bracket taxpayers.
Conclusion
A CRUT may be one of the most effective tools for a donor who wants income that may grow with the trust, combined with a charitable deduction and capital gains tax deferral on appreciated assets. The right structure depends on the donor’s assets, income needs, and charitable goals.
To explore whether a CRUT fits your situation, visit planyourfreedom.com or contact our office.
Sources
- Internal Revenue Code (charitable remainder trust provisions)
- One Big Beautiful Bill Act of 2025, Pub. L. 119-21
- IRS Publication 526 (Charitable Contributions)
