What benefit does the grantor of a Charitable Remainder Unitrust (CRUT) receive?

The benefit that the grantor of a Charitable Remainder Unitrust (CRUT) receives is an income tax deduction in the year the trust is created. When a donor establishes a CRUT, they contribute assets to the trust, which then pays a specified percentage of the trust's assets to the donor or other designated beneficiaries for a set term or for their lifetime. After this term ends, the remaining assets in the trust are transferred to a designated charity.

The IRS allows the grantor to claim a charitable deduction on their income taxes based on the present value of the charitable remainder interest at the time of the trust's creation. This deduction provides immediate tax benefits, reducing the grantor's taxable income for the year, which can be a significant advantage in tax planning.

While the grantor does receive a lifetime income stream from the trust's payout, that is not a tax benefit in the same way the income tax deduction is. Additionally, the CRUT does not provide a capital gains tax exclusion or a step-up in basis for donated assets. The focus of the tax deduction is on fulfilling the charitable intent while also providing financial relief through tax savings for the grantor.