Charitable Remainder Unitrust (CRUT) — §664
The complete practitioner guide to the Charitable Remainder Unitrust — covering the CRUT structure, income stream, charitable deduction, capital gains deferral, and comparison with CRATs and DAFs for 2026.
CRUT Overview
A Charitable Remainder Unitrust (CRUT) is an irrevocable trust that pays a fixed percentage (at least 5%) of the trust's assets annually to the donor (or other non-charitable beneficiaries) for a term of years or the life of the beneficiary, with the remainder passing to one or more qualified charities at the end of the term. The CRUT is one of the most powerful charitable giving vehicles available to high-income taxpayers with appreciated assets.
The primary tax benefits of a CRUT are: (1) an immediate charitable deduction equal to the present value of the remainder interest (the amount expected to pass to charity); (2) deferral of capital gains on appreciated assets contributed to the trust; and (3) an income stream for the donor's lifetime or a term of years. The CRUT is particularly valuable for donors with highly appreciated, low-basis assets (real estate, closely held stock, publicly traded securities) who want to diversify without triggering immediate capital gains tax.
CRUT Structure and Requirements
A CRUT must meet the following requirements under §664: (1) the annual payout rate must be at least 5% and no more than 50% of the trust's assets; (2) the remainder interest must be at least 10% of the initial fair market value of the assets contributed; (3) the trust must be irrevocable; and (4) the remainder must pass to a qualified charity.
| Requirement | Detail |
|---|---|
| Annual payout rate | 5%–50% of trust assets (revalued annually) |
| Charitable remainder | At least 10% of initial FMV |
| Trust term | Life of beneficiary or up to 20 years |
| Irrevocability | Trust is irrevocable at funding |
| Charitable beneficiary | Must be a qualified 501(c)(3) organization |
| Trustee | Donor can serve as trustee |
Charitable Deduction Calculation
The charitable deduction for a CRUT is the present value of the remainder interest — the amount expected to pass to charity at the end of the trust term, discounted to present value using the IRS Section 7520 rate (the applicable federal rate for the month of contribution). A higher Section 7520 rate produces a larger charitable deduction (because the present value of the income stream is lower, leaving more for charity).
The deduction is limited to 30% of AGI for contributions of appreciated property to a CRUT (50% of AGI for cash contributions). Excess deductions can be carried forward for up to 5 years. Practitioners should model the deduction for each client using the current Section 7520 rate and the client's expected income stream.
CRUT vs. CRAT vs. DAF
The CRUT, Charitable Remainder Annuity Trust (CRAT), and Donor-Advised Fund (DAF) are the three most common charitable giving vehicles. The key differences:
| Feature | CRUT | CRAT | DAF |
|---|---|---|---|
| Annual payout | Fixed % of assets (varies) | Fixed $ amount | None (donor recommends grants) |
| Capital gains deferral | Yes | Yes | Yes (at contribution) |
| Charitable deduction | At funding | At funding | At contribution |
| Flexibility | High (payout varies with assets) | Low (fixed payout) | High (grant timing flexible) |
| Remainder to charity | Yes | Yes | All assets |
| Complexity | High | Medium | Low |
Frequently Asked Questions
The minimum annual payout rate for a CRUT is 5% of the trust's assets (revalued annually). The maximum payout rate is 50%. The charitable remainder must be at least 10% of the initial fair market value of the assets contributed.
The charitable deduction is the present value of the remainder interest — the amount expected to pass to charity at the end of the trust term, discounted to present value using the IRS Section 7520 rate. A higher Section 7520 rate produces a larger charitable deduction. The deduction is limited to 30% of AGI for contributions of appreciated property.
Yes — real estate is one of the most common assets contributed to a CRUT. The donor contributes the real estate to the CRUT, which sells the property and reinvests the proceeds. The capital gains on the sale are not immediately recognized by the donor — they are recognized by the trust as the income stream is paid out. The donor receives an immediate charitable deduction equal to the present value of the remainder interest.
A CRUT pays a fixed percentage of the trust's assets annually (the payout varies as the trust's value changes). A CRAT pays a fixed dollar amount annually (the payout does not change). A CRUT is generally preferred because the payout grows with the trust's assets, providing inflation protection.
Yes — the donor can serve as trustee of a CRUT. However, the donor-trustee cannot have the power to change the charitable beneficiary or the payout rate, as these powers would cause the trust to be included in the donor's estate.
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