Planned Giving for Financial Advisors
Flip Charitable Remainder Unitrust (Flip CRUT) — Detailed Gift Description
A “Flip” Charitable Remainder Unitrust (“Flip” CRUT) is a type of CRUT permitted by federal tax law, and it must meet all requirements applicable to basic CRUTs. The only difference between a basic CRUT and a “Flip” CRUT is that until a triggering, or “flip” date, the payments to the income beneficiaries will comprise net income only. After the “flip” date, the income beneficiaries will begin receiving straight unitrust payments just as with a basic CRUT.
“Flip” CRUTs are used in two circumstances:
- When a donor wants to fund her trust with illiquid assets such as real estate, business interests, or even some types of tangible personal property. A “Flip” CRUT gives your client the ability to donate an asset earning little or no current income (such as real estate or a family business interest) to a unitrust, secure an immediate charitable deduction, and structure a standard unitrust payout at a later date when the original assets are sold and reinvested.
- When a donor wants to postpone receiving full unitrust payments until a future date — for example, when she plans to retire or when she anticipates a need for more income (for example, when a child’s college expenses will come due).
If your client intends to donate illiquid assets that need to be insured or maintained, we may as her to also contribute cash or other liquid assets to cover the required maintenance expenses incurred before the property is sold.
Please review the information about basic charitable remainder trusts for important details about CRUTs, their taxation, and their required terms.
Is this gift right for your client?
A “Flip” CRUT might be the right planned gift for your client if:
- She wants to make a major gift to Harper College Educational Foundation while retaining, increasing, or creating an income stream from the assets she contributes.
- She wants to donate illiquid assets such as real estate, business interests, or even some types of tangible personal property to create a charitable trust and wants to avoid or defer the capital gains cost of a sale.
- She wants to postpone full unitrust payments until a date in the future.
- She wants the unitrust payments to be able to increase over time, and she’s willing to risk decreases during market downturns.