What is a key advantage of a charitable remainder uni-trust (CRUT)?

Prepare for the Canon Financial Institute CFIRS Exam with flashcards and multiple choice questions. Each question comes with hints and explanations for better understanding. Get ready to excel in your exam!

A charitable remainder uni-trust (CRUT) is designed to provide a flexible income stream to the donor while also benefiting a charity after the donor's passing. One of the key advantages of a CRUT is that it mandates an income payout of at least 5% of the trust's fair market value, which is determined annually. This feature allows the beneficiaries to receive a reliable stream of income that can adjust based on the trust's performance and market conditions.

This dynamic payout mechanism not only helps ensure the income is significant relative to the trust's value but also allows for potential growth of the trust assets over time, benefiting both the income beneficiaries during their lifetime and the charitable organization after their passing. This structure can be particularly appealing in a rising market, as it provides the possibility of increased payouts without locking the donor into a fixed annual amount, enhancing both flexibility and potential returns.

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