Charitable remainder unitrusts (CRUTs) are something of a Swiss army knife for high-net-worth individuals looking to manage a considerable amount of assets.
Let’s say you want to provide regular income for yourself and/or those you love. Or maybe you want to set aside money for a charitable cause or two that matter deeply to you and your family. Or maybe your wealth is highly concentrated in a single stock you’ve accumulated over years of work, and you want to diversify your holdings without absorbing a colossal tax hit.
Depending on your situation, CRUTs very well might be the appropriate solution for these and other challenges.
Today, I’ll introduce you to charitable remainder unitrusts. I’ll cover what they are, how they work, the tax break associated with CRUTs, and how they compare to another closely related trust.
What Is a Charitable Remainder Unitrust?
A charitable remainder trust (CRT) is a type of irrevocable trust that provides income to one or more living beneficiaries for a predetermined amount of time, then distributes the remainder to one or more charitable organizations when the trust expires.
There are two types of CRTs:
- Charitable remainder unitrusts (CRUTs)
- Charitable remainder annuity trusts (CRATs)
CRUTs and CRATs are pretty similar, but they do have a handful of differing features that could make them either more or less appealing to you, depending on what you’re trying to accomplish.
How Do CRUTs Work?
When you establish a charitable remainder unitrust, you make an initial, partially tax-deductible contribution of cash, property, or other assets. You then assign one or more living noncharitable beneficiaries to receive income from the trust on a regular basis. And should you want to, you can make additional contributions over time.
When the CRUT expires (either after a predetermined number of years, or upon the death of one or more of the noncharitable beneficiaries), the remainder will go to one or more qualified U.S. charitable organizations.
Among other things, you’ll need to determine:
- Living noncharitable beneficiary(ies): You can select one or more beneficiaries. These typically include individuals (family, friends, even yourself), but they can also include private, noncharitable entities.
- How much income will be distributed: You must select a fixed percentage of the trust’s value that will be paid each year to the noncharitable beneficiaries. The trust must pay at least 5%, but no more than 50%, of the fair market value of the trust’s assets, which is measured each year.
- Payment frequency: CRUTs typically distribute payments annually, though they can also be structured to pay semiannually, quarterly, even monthly.
- The trust term: You may choose a term of up to 20 years or the life of one or more noncharitable beneficiaries.
- Which charity(ies) you’ll donate to: The remainder must be donated to one or more qualified U.S. charitable organizations. Generally, these must be 501(c)(3) organizations.
The amount you ultimately donate has to be a minimum of 10% of the initial net fair market value of everything placed in the trust.Â
And because a CRUT is an irrevocable trust, you generally can’t take out any of the assets you put in.
Example
Meryl is a 60-year-old single filer who creates a single-life CRUT in August 2026 and contributes $2 million in cash. She names herself a noncharitable beneficiary and opts for a 5% annual payout. Meryl would receive $100,000 in the first year. If she contributed another $600,000 in cash (for a total of $2.5 million), her next annual payment would come to $125,000. If the assets in her trust dipped to $1.5 million, she would collect $75,000 in the next year.Â
When the term is over, the remainder is donated to the charity of her choice.
Related: When Should You Take Social Security?
CRUT Tax Deduction
Contributing to a charitable remainder trust of any sort provides you with a partial but immediate tax deduction. A few things to note about the deduction:
- The deduction is based on the expected charitable remainder.
- The deduction is subject to AGI limits based on how the CRT is funded—generally, it’s 60% of AGI for cash, 30% for long-term appreciated property.
- Starting in 2026, you can only claim charitable deductions on donations that exceed 0.5% of your annual AGI. (So, if your AGI is $100,000, you can only deduct amounts over $500.)
- Unused charitable deductions can carry forward for up to five consecutive years before expiring.
- The maximum tax benefit of your deduction is limited to 35% if you’re in the top 37% tax bracket.
Example
What would Meryl’s deduction look like?Â
Like I mentioned above, Meryl is a 60-year-old single filer who has contributed $1.5 million in cash to a single-life CRUT in August 2026. She has decided to make herself the sole noncharitable beneficiary and collect annual payments of 5%.
Also, Meryl has $750,000 in AGI, putting her in the 37% tax bracket. And because we can’t deduct contributions until they exceed 0.5% of her AGI ($3,750), I’ll use $1,996,250 as the contribution basis for our calculations.Â
Let’s run through the steps of calculating her deduction together:
- We get the Section 7520 rate for August 2026, which is 5.2%.
- We plug Meryl’s Section 7520 rate (5.2%) and payment frequency (annually) into Table F to get her adjustment factor, which is 1.0.
- We multiply Meryl’s payout rate (5%) by the adjustment factor (1.0) to get the adjusted payout rate, which is 5%.
- We plug Meryl’s adjusted payout rate (5%) and age (60) into Table U(1) (2010CM) to get our unitrust remainder factor, which is 0.34995.
- We multiply the initial contribution less the 0.5% in AGI ($1,996,250) by the unitrust remainder factor (0.34995) to get the charitable deduction amount of $698,587.69.
- Because it’s a cash gift, the deduction is limited to 60% of Meryl’s AGI. So we would multiply her AGI ($750,000) by 60% (0.60), which is $450,000.
- Because the charitable deduction amount of $698,587.69 is greater than that, her actual 2026 deduction will be $450,000, and she can carry the remaining $248,587.69 over into 2027.
Now that we have the tax deduction amount, here’s what we know about Meryl’s tax benefit:
- Meryl is in the 37% tax bracket, so her maximum tax benefit is capped at 35%. So we multiply the deduction ($450,000) by 35% (0.35) to get her actual tax benefit for 2026, which is $157,500.
- If Meryl made no other charitable contributions in 2027, she would multiply the carryover deduction ($248,587.69) by 35% (0.35) to get her 2027 tax benefit, which is $87,005.69.
- If Meryl made additional charitable contributions in 2027, she would need to go through the above steps again (including using an updated Section 7520 rate), to calculate the charitable deduction amount for the new contribution, then determine her tax benefit for the year.
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Related: Do I Need a Financial Advisor? 7 Questions to Ask Yourself
How Do CRUTs Differ From CRATs?
Like I mentioned above, charitable remainder annuity trusts and charitable remainder unitrusts share a lot of similarities, but there are a few key differences:
| Charity Remainder Unitrusts (CRUTs) | Charity Remainder Annuity Trusts (CRATs) | |
|---|---|---|
| Payment type | Fixed percentage of the value of the trust | Fixed dollar amount |
| Payment valuation | At least 5%, but no more than 50%, of the fair market value of the assets, valued annually | At least 5%, but no more than 50%, of the fair market value of the trust's property when the trust is established |
| Contributions | Initial contribution, additional contributions | Initial contribution |
| 5% probability test | No | Yes* |
| Calculation tables | Table S (2010CM), Table K | Table F, Table U(1) (2010CM) |
| * Lifetime CRATs only | ||
The “5% exhaustion probability test” doesn’t apply to CRUTs, nor term CRATs, for that matter. It only applies to lifetime CRATs because they’re expected to pay out a fixed dollar amount over an indefinite period of time. Thus, the 5% exhaustion probability test is used to ensure there’s less than a 5% chance that the designated level of payments will completely exhaust the corpus (principal) before the trust terminates and sends its remainder to the designated charity(ies).
Related: How Much Should I Save Each Month?
Are CRUTs Better Than CRATs?
Broadly speaking, yes, charitable remainder unitrusts are preferred over CRATs, primarily because you can make additional contributions to them down the road. That in turn can increase the size of the trust’s income payments.
Whether being paid a fixed percentage is better than being paid a fixed dollar amount largely boils down to what’s important to you.
If you’re most interested in maximizing the income paid to beneficiaries, you’ll want a CRUT. That fixed percentage ensures that if the account grows, the distributions will, too. And both investment returns and future contributions can improve your trust’s value.
However, if you value a consistent level of income instead, a CRAT provides that. The performance of the trust’s assets won’t alter the distribution from one year to the next.
It’s generally best to talk to a financial advisor to determine which kind of CRT is best for you.
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Related: 5 Social Security Moves Every High-Net-Worth Individual Should Know
A Tax Note on All CRTs
If you establish a lifetime CRT, whether it’s a CRAT or a CRUT, and you name a noncharitable beneficiary other than you or your spouse, your contribution may be considered a gift for federal gift tax purposes.
For 2026, the annual federal gift tax exclusion is $19,000 per recipient. Spouses can combine exclusions to gift up to $38,000 per recipient, though this requires electing gift-splitting on IRS Form 709.
The lifetime gift and estate tax exemption, meanwhile, is currently $15 million per individual (or $30 million for married couples).
