A Unitrust refers to a trust from which a fixed percentage of the net fair market value of the trusts assets valued annually, is paid each year to a beneficiary. In these trusts, the donor transfers property to a trust after retaining the right to receive payments from the trust for a specified term. Once the term ends, the trust estate is paid to a public charity designated by the donor. During a unitrust's term, a trustee invests the unitrust's assets and pays a fixed percentage of the unitrust's current value, as determined annually, to the income beneficiaries. If the unitrust's value goes up, its payout increases proportionately. Likewise, if the unitrust's value goes down, the amount it distributes also declines. Payments must be at least five percent of the trust's annual value and are made out of trust income, or trust principal if income is not adequate.
Connecticut Charitable Remainder Unit rust (CRT) is a legal and financial tool designed to benefit donors and charitable organizations in Connecticut. It allows the donor to receive income from their donated assets while ensuring that the remaining value of the assets benefits the designated charitable organization(s) upon their passing. This charitable planning vehicle provides various benefits, such as income tax deductions, reduction of capital gains taxes, potential estate tax savings, and the ability to support causes close to one's heart. CRTs are suitable for individuals or families who wish to make a significant charitable impact while also preserving their financial security during their lifetime. There are multiple types of Connecticut Charitable Remainder Unit rusts available, including: 1. Charitable Remainder Annuity Trust (CAT): This type of CRT provides a fixed income to the donor or their designated beneficiaries for life or a specified term. The income remains constant, regardless of fluctuations in the trust's value. 2. Charitable Remainder Unit rust (CUT): Unlike a CAT, a CUT provides the donor with a variable income stream that fluctuates based on the trust's value. This means the income may increase or decrease over time but offers potential growth opportunities. 3. Net Income Charitable Remainder Unit rust (NICEST): With the NICEST, the donor receives an income based on the trust's net income for each year. If the trust's income is lower than the specified amount, the income may be reduced. However, any shortfall in income can be made up in future years if the trust's income exceeds the specified amount. 4. Net Income with Makeup Charitable Remainder Unit rust (TIMEOUT): Similar to the NICEST, a TIMEOUT provides income based on the trust's net income for each year. However, any shortfall in income can be made up within five years using the trust's excess income. 5. Flip Charitable Remainder Unit rust: This CRT type starts as a CAT or CUT and "flips" into the other type after a specified triggering event, such as the sale of an asset or reaching a certain date. This allows donors to benefit from a fixed or variable income stream depending on their needs at different stages of their lives. Connecticut Charitable Remainder Unit rusts offer flexibility, tax advantages, and the opportunity to support charitable organizations while providing financial benefits to the donor. They should be established with the guidance of legal and financial professionals to ensure compliance with Connecticut regulations and to maximize the benefits for both the donor and the designated charitable organization(s).
