A Charitable Remainder Unitrust (CRUT) is a powerful estate planning tool that allows you to convert highly appreciated assets into a lifetime income stream without paying immediate capital gains tax, while supporting a charitable cause.
How This Calculator Works
This calculator simulates the financial trajectory of a "Term of Years" CRUT. Here is a breakdown of the inputs and calculation logic:
Initial Fair Market Value: The current value of the cash, stock, or real estate you are transferring into the trust.
Unitrust Payout Rate: The fixed percentage of the trust's value paid to you (the beneficiary) annually. By law, this must be between 5% and 50%. The payment amount is recalculated every year based on the trust's updated value.
Est. Annual Asset Growth: The projected rate of return on the investments inside the trust. If the growth rate exceeds the payout rate, your income and the gift to charity will grow over time.
Trust Term: The number of years the trust will operate before distributing the remainder to charity (Max 20 years for a term trust).
IRS Section 7520 Rate: An interest rate published monthly by the IRS, used to calculate the present value of the charitable deduction.
The 10% Remainder Rule
To qualify as a valid CRUT under IRS regulations, the present value of the remainder interest going to charity must be at least 10% of the initial contribution. This calculator performs a simplified check of this requirement. If the combination of your payout rate and term length reduces the charitable portion below 10%, the trust may not be valid.
Key Benefits
Income Tax Deduction: You receive an immediate income tax deduction for the present value of the estimated remainder interest.
Capital Gains Deferral: When you transfer appreciated assets to the CRUT, the trust can sell them tax-free, allowing the full proceeds to be reinvested to generate income.
Variable Income: Unlike an annuity trust (CRAT), a Unitrust provides income that can increase if the trust assets perform well, offering a potential hedge against inflation.
Disclaimer: This calculator is for educational and illustrative purposes only. Actual results will vary based on market performance and specific IRS regulations. CRUT calculations involve complex actuarial factors. Always consult with a qualified tax attorney or financial advisor before establishing a trust.
function calculateCRUT() {
// Clear previous alerts
var valMsg = document.getElementById('validationMsg');
var ruleMsg = document.getElementById('ruleCheckMsg');
valMsg.style.display = 'none';
ruleMsg.style.display = 'none';
// Get inputs
var fmv = parseFloat(document.getElementById('trustValue').value);
var payoutRate = parseFloat(document.getElementById('payoutRate').value);
var growthRate = parseFloat(document.getElementById('growthRate').value);
var term = parseInt(document.getElementById('trustTerm').value);
var taxRate = parseFloat(document.getElementById('taxRate').value);
var discountRate = parseFloat(document.getElementById('discountRate').value);
// Validation
if (isNaN(fmv) || isNaN(payoutRate) || isNaN(growthRate) || isNaN(term) || isNaN(discountRate)) {
valMsg.innerText = "Please fill in all required fields with valid numbers.";
valMsg.style.display = 'block';
return;
}
if (payoutRate 50) {
valMsg.innerText = "Error: Payout Rate must be between 5% and 50% according to IRS rules.";
valMsg.style.display = 'block';
return;
}
if (term > 20) {
valMsg.innerText = "Error: For a Term CRUT, the maximum term is 20 years.";
valMsg.style.display = 'block';
return;
}
// Logic for Charitable Deduction (Simplified Approximation for Term CRUT)
// Note: Exact IRS calc requires Table F adjustment factors based on payment frequency.
// We assume Annual Payments at End of Year for estimation logic to keep JS self-contained.
// 1. Calculate Adjustment Factor for End-of-Year payment
// Factor = 1 / (1 + i) roughly, but IRS uses specific interpolation.
// Let's use the standard Present Value formula for the Remainder.
// Remainder Factor = (1 – Adjusted Payout Rate)^Term ?
// Standard approximation: Deduction = FMV * ( (1 – PayoutRate)^n / (1+DiscountRate)^n )?
// No, CRUT logic is: Deduction = FMV * (1 – PayoutRate)^n (roughly, if discount rate ~ growth).
// IRS Method approx:
// Adjusted Payout Rate = PayoutRate * Factor
// Factor for Annual @ End of Year ≈ 1 / (1 + DiscountRate/100) is too aggressive.
// Let's use the simple logic: The deduction is the Present Value of the remainder.
// We project the value to 0 if Payout > Growth? No.
// Use the standard IRS formula for Term of Years:
// Factor = (1 – AdjustedPayoutRate) ^ Term.
// Adjusted Payout Rate calculation (using 7520 rate):
// K = PayoutRate/100
// i = DiscountRate/100
// AdjFactor = 1 / (1 + i); (Simplified for annual payment at end of year)
// AdjustedK = K * AdjFactor;
var dr = discountRate / 100;
var pr = payoutRate / 100;
// Adjustment factor for Annual Payments at End of Period
// Formula: Factor = 1 / (1 + i) is a safe conservative estimate for the calculator.
var adjFactor = 1 / (1 + dr);
var adjustedPayoutRate = pr * adjFactor;
// Remainder Factor
var remainderFactor = Math.pow((1 – adjustedPayoutRate), term);
var deduction = fmv * remainderFactor;
// 10% Rule Check
var tenPercentCheck = deduction >= (0.10 * fmv);
if (!tenPercentCheck) {
ruleMsg.innerHTML = "Warning: The estimated charitable deduction is less than 10% of the initial value ($" + formatMoney(deduction) + "). This trust may not qualify as a valid CRUT under IRS rules. Consider lowering the payout rate or shortening the term.";
ruleMsg.style.display = 'block';
}
// Tax Savings
var taxSavings = deduction * (taxRate / 100);
// Schedule Calculation
var currentBalance = fmv;
var totalIncome = 0;
var scheduleHtml = "";
for (var i = 1; i <= term; i++) {
// CRUT Payout is usually based on Start of Year balance
var annualPayout = currentBalance * pr;
// Growth is applied to the balance (assuming assets generate return throughout year)
// End Balance = (StartBalance * (1 + Growth)) – Payout?
// Or (StartBalance – Payout) * (1 + Growth) if payout is at start?
// We assumed End of Year payout for deduction, so growth applies to full amount first.
var growthAmount = currentBalance * (growthRate / 100);
var endingBalance = currentBalance + growthAmount – annualPayout;
// Prevent negative balance
if (endingBalance < 0) {
annualPayout += endingBalance; // Reduce payout to what's left
endingBalance = 0;
}
totalIncome += annualPayout;
scheduleHtml += "