Flip Charitable Remainder Unitrust (Flip-CRUT)
A Flip-CRUT is a net income unitrust (either a net income with makeup charitable remainder unitrust (NIMCRUT) or a net income charitable remainder trust (NI-CRUT)) that switches to a standard charitable remainder unitrust (CRUT) upon a triggering event or date.
A standard CRUT is a trust that makes payments to a non-charitable beneficiary(ies) for a term of years or a lifetime(s) then distributes the remainder to a charity. Payments to the non-charitable beneficiaries are a percentage of trust assets as computed each year, and must be paid from income earned by the trust or, if necessary, from trust principal. As such, standard CRUTs are typically funded with income-producing property, and the trustee's ability to grow the principal is limited.
Example(s): John's CRUT pays out 5 percent of trust assets each year. On January 1, the value of the trust is $1 million. During the year, the trust earns $30,000. On December 31, the trust distributes $50,000 to John ($30,000 from earnings and $20,000 from principal).