If a CRUT is funded with assets worth $500,000 and has a payout rate of five percent, to what extent does the trust’s structure affect how it will perform over time based on certain assumptions? Specifically, it is assumed that during each of the trust’s first five years, its assets appreciate in value at a rate of six percent although its net income is only one percent. It cannot become a NICRUT or a NIMCRUT again. At the start of the taxable year of the trust (which, in the case of a CRT, is the same as the calendar year), after the taxable year in which the triggering event has occurred, the trust commences its existence as a SCRUT going forward. The flip occurs in connection with what the IRS refers to as a “triggering event,” about which more will be said momentarily. It is not possible to have a flip trust that begins as a CRUT and then becomes a charitable remainder annuity trust (CRAT), nor is the opposite possible. Initially and then will be transformed into a standard CRUT (SCRUT). a net-income with make-up CRUT (NIMCRUT).In particular, a flip trust must begin with a net-income limitation, meaning it will be either be: Through a regulation issued in December 1998, the Internal Revenue Service (IRS) officially gave its blessing to a type of charitable remainder trust (CRT) known as the “flip trust.” As anticipated, this now well-accepted planned giving vehicle has proven to be quite versatile.Īs its name suggests, a flip trust starts out as a charitable remainder unitrust (CRUT) having one kind of structure, but then “flips” to have a different structure during the rest of the trust term.
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