Often abbreviated to CRUT, a charitable remainder unitrust is a special financial tool that helps a high net worth individual give assets both to a charity and to a beneficiary, such as a child or a grandchild. A CRUT is best explained through the use of an example.
Let’s say a grandmother wants to give money to the American Cancer Association as well as to their great-grandchild. She puts $20,000,000 into a CRUT. For the remainder of the grandmother’s life, the interest gained from the CRUT is given to their great-grandchild.
Once the grandmother passes, the entirety of the fund is given to the American Cancer Association.
Thus, the grandmother is able to provide for their beneficiaries during their lifetime, but ultimately are aware that their funds will go to charity afterwards. There are other funds structured to do the opposite: payout to charity over time, and then give the assets to family later. One of the major charitable remainder advantages is that it reduces the amount of taxes paid.