Charitable remainder unitrusts (CRUTs) are popular because they offer major tax benefits, such as upfront income tax deductions, estate tax reduction, and deferral of capital gains if appreciated assets are contributed. CRUT income beneficiaries can receive a lifetime income. Eventually, the trust fund will pass to a charity or charities chosen by the trust creator.
In 2002, the IRS has opened the door for a “special needs” trust to be the income beneficiary of a CRUT. The trust must be solely devoted to caring for a disabled beneficiary.
The beneficiary must have a medical impairment, physical or mental, that a doctor can describe.
This condition must be expected to last for at least a year.
This individual can’t have anyone else handling his financial affairs.
Assuming those conditions are met, you can set up a CRUT and enjoy the associated tax benefits. The CRUT can make payouts to a special needs trust. The trustee of the special needs trust, in turn, can make distributions for the benefit of the disabled beneficiary in order to provide a desirable lifestyle while not jeopardizing any public benefits that might be received.
