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How a Charitable Remainder Unitrust (CRUT) Can Pay You for Life—and Support a Cause You Love
How a Charitable Remainder Unitrust (CRUT) Can Pay You for Life—and Support a Cause You Love
If you’re a California resident with appreciated assets—like stock, real estate, or a business—you may feel stuck:
Sell now and face a hefty capital gains tax? Or hold forever and lose the flexibility?
There’s a better path: a Charitable Remainder Unitrust (CRUT).
It’s a powerful tool that pays you income, reduces taxes, and leaves a legacy.
Let’s break it down.
What Is a CRUT?
A CRUT is a special type of irrevocable trust.
You transfer assets into the trust. The trust can sell those assets—without triggering capital gains tax—and reinvest the money.
Each year, the CRUT pays you (or someone you choose) a set percentage of its value—usually 5% to 8%.
When the trust ends (either after your lifetime or up to 20 years), what’s left goes to a charity you select.
Why Californians Use CRUTs
High-income Californians face some of the nation’s steepest tax rates:
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Capital gains are taxed as ordinary income in California.
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No step-up in cost basis if you sell before death.
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No charitable deduction without a structured gift.
A CRUT helps you:
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Avoid state and federal capital gains taxes when appreciated assets are sold inside the trust.
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Receive a lifetime income stream, adjusted annually.
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Get a current charitable income tax deduction.
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Remove assets from your taxable estate.
A Real Example
Let’s say you own Bay Area rental property worth $2 million with a low basis.
You:
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Transfer it into a CRUT.
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The trust sells it, tax-free.
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The proceeds are reinvested.
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You receive 6% of the trust value annually (starting at $120,000).
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When the trust ends, the remainder—say, $1.5 million—goes to your chosen nonprofit.
You’ve avoided a seven-figure tax bill, created income for life, and supported a cause you care about.
What’s the Catch?
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You can’t take it back. Once the CRUT is created, it’s irrevocable.
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If the trust assets underperform, your annual payout could drop.
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The remainder goes to charity—not your heirs (but we can fix that—ask me about ILITs or wealth replacement strategies).
CRUT vs. CRAT vs. CLT
Here’s how CRUTs compare to other charitable trusts used in California estate planning:
Feature |
CRUT (Charitable Remainder Unitrust) |
CRAT (Charitable Remainder Annuity Trust) |
CLT (Charitable Lead Trust) |
---|---|---|---|
Payout Type |
Fixed % of trust value (recalculated annually) |
Fixed dollar amount |
Charity gets income; remainder to heirs |
Payout Fluctuates? |
Yes |
No |
No |
Who Gets Paid First? |
You (or your beneficiary) |
You (or your beneficiary) |
Charity |
Charity Receives |
What’s left at the end |
What’s left at the end |
Income stream for a set term |
Term Options |
Life or up to 20 years |
Life or up to 20 years |
Fixed term or lifetime |
Tax Deduction |
Based on projected gift to charity |
Based on projected gift to charity |
Based on present value of charity’s interest |
Best Use Case |
Appreciated assets + lifetime income |
Predictable fixed income |
Reduce estate tax + gift to heirs |
Income to Donor |
Variable, adjusts with trust performance |
Fixed |
None |
Revocable? |
No |
No |
No |
Bottom Line
A CRUT isn’t just a tax play—it’s a way to create predictable income, preserve wealth, and make a lasting difference.
If you:
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Own appreciated assets in California
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Want steady income for life
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Care about leaving a charitable legacy
…a CRUT deserves a serious look.
Need help deciding if it fits your estate plan?
Let’s talk. I’ll help you run the numbers, choose the right structure, and coordinate with your financial team.