Oklahoma Baptist Homes for Children

Neal Wooldridge

a word from Neal Wooldridge
Vice President for Planned Giving

What is a Crut?

A. Description

The Charitable Remainder Unitrust is a tax-exempt trust that entitles the donor to bypass capital gain tax and receive life income based upon a fixed percentage times the value of trust assets each year. In addition, the grantor (donor) receives an income tax deduction in the year of the gift. This deduction is dependent upon the age or ages of the income beneficiaries and, if applicable, the length of a term of years. 

B. Duration

A Charitable Remainder Unitrust may last for one life, two lives, a term of up to 20 years; one or two lives with guaranteed minimum years up to 20, or multiple lives. All of these options entitle trust grantors (donor) to a charitable deduction and enable them to transfer assets and bypass capital gain tax. A trust for one life or for husband and wife is free of federal estate tax; other trust agreements may result in federal gift or estate tax for the value of income interests transferred to non-spousal beneficiaries.

C. Deduction Methods

Charitable income tax deduction is calculated for the value today of the amount charity will receive in the future. These deductions depend on ages, term of years, if applicable, and a current interest rate that changes each month. The IRS publishes this Applicable Federal Interest Rate monthly: trust grantors (donor) may choose the rate for the current month or either of the prior two months.

D. Information Needed for an Illustration

For a Charitable Remainder Unitrust illustration, the information should include birth dates, income tax bracket, the proposed gift date, the payout frequency (monthly, quarterly, semiannually or annually), the fair market value and cost basis of the asset. In addition, it is helpful to know the approximate current income, the estimated trust earnings or return per year, and the amount (5% or greater) that the Unitrust will pay each year. With most Unitrust illustrations, it is possible to run two payout percentages and compare the tax and financial benefits of each.

If you need to receive a CRUT, illustration or more information about a CRUT please call Neal Wooldridge, Vice President for Planned Giving at (405) 570-9836 or e-mail Neal Wooldridge.

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