How A Charitable Remainder Unitrust (CRUT) Might Be A Good Investment Strategy

The Charitable Remainder Unitrust (CRUT) is making a comeback as families are looking for ways to bypass some of the taxation issues facing traditional IRA’s.  Distributions from a traditional IRA are taxed at regular income tax rates.  Families could stretch an IRA to get years of tax-deferred growth, but people often do not appreciate the tax issues and it is human nature to want to cash out. 

A CRUT can solve many of the problems that come up with traditional IRA’s.  A person should include a provision for a ‘testamentary’ CRUT in their Will and then name the CRUT as the beneficiary on their IRA form.  The CRUT will make annual payments to the designated heir or heirs for a fixed number of years, with the listed charity receiving the remainder.  One other benefit is that large charities that are named as beneficiaries will often manage the trust for free. 

See Ashlea Ebeling, The Charitable IRA Stretch For Kids, Siblings, Parents, Forbes, June 17, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.