How to handle CRUT income?


I'm considering a CRUT but am not sure how to handle the income. For withdrawals I'm experimenting with using Special Receipts dividing what could be received into ordinary income and capital gains and dividend components. Over my expected lifetime I'm guesstimating a small real percentage portfolio increase each year. However would it be better modeled as a portfolio under Monte Carlo simulation given its makeup (i.e., the usual diversified portfolio created by the charitable institution)? But unlike a held portfolio there's no spend-down; i.e., the agreed-upon percentage income thrown off is received but the remainder, upon my untimely demise, goes to the charity (unless I'm completely misunderstanding how portfolio's are handled under Monte Carlo simulation). Or should it be treated as an annuity? Suggestions?

Obviously, the flip side is how best to model creating a CRUT with existing assets but to keep things simple for now that'll be another question.


Dan Royer's picture

Others may think differently, but it seems to me much easier to do the calculation of the return on your own and then enter it as a series of special receipts. I'd prefer to just estimate the reasonable return myself rather than leave it to the complexity of the monte carlo inputs and as you say, the spend down issue because this is really an annuity of sorts. I feel it's just easier to see and understand and change as a special receipt.

The retirement portfolios in Monte Carlo are inherited by your survivor. But by using special receipts, you can just eliminate those receipts in the contingent planning so that there is nothing left to survivors or estate.