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Is A Qualified Retirement Plan Enough?

A practical guide to NIMCRUTs

NI = Net Income: Only trust income is paid by the unitrust.* You control the level of income distributed.

M = Makeup provision: Amounts not paid due to lack of trust income can be made up in the future with income excesses.**

CRUT = Charitable Remainder Unitrust: Additional contributions can be made at any time in any amount.

* A minimum of 5% is paid annually. ** To the extent trust income exceeds its fixed percentage.

Have you invested the maximum in your qualified retirement plan but would like to put more money away on a tax-favored basis?

Would you like access to retirement savings without having to comply with burdensome rules or to pay penalties?

Are you frustrated by the complexity, expense and fairness rules of qualified plans?

If so, you may be a candidate for a NIMCRUT. This Web page, along with input from your professional financial advisor, can help you decide.


NIMCRUT is short for Net Income with Makeup Charitable Remainder Unitrust, a trust specifically defined by federal tax law that allows you to provide income to yourself or others for life, or a term of years, and to receive a tax deduction.


As the owner of a NIMCRUT (sometimes also referred to as the "donor," "grantor," "settlor" or "trustor" in trust documents), you irrevocably transfer assets to your trust, which is managed by a trustee of your choice. During the term of the trust, the trustee invests the assets and pays a fixed percentage of the value, as revalued annually, to you and/or others, such as a spouse or children. Should the trust earn less income than the pre-determined fixed percentage (a minimum of 5% is required), it will only distribute what is earned.

This feature ensures trust principal remains intact at all times.

If, in a later year, the trust earns more than the fixed percentage, it will make up its earlier shortfall to the extent its earned income exceeds its fixed percentage. When the trust ends, principal passes to charity for the purpose you designate.

Are You A Candidate for A NIMCRUT?

NIMCRUTs appeal to a wide range of individuals and business owners. You may find one especially advantageous if:

  • You have invested the maximum in your qualified retirement plan for this year and want to put more money away in another tax-advantaged vehicle.
  • You want a tax-favored vehicle that offers liquidity.
  • You want to take advantage of tax-deferred compounding of investment gains.
  • You want to avoid the potentially confiscatory taxation of qualified plan assets at death.
  • You want a tax-advantaged vehicle that does not involve time-consuming administrative responsibilities.
  • You are not completely satisfied with the restrictions and requirements of your qualified retirement plan.

NIMCRUTs Offer Many Benefits

With a NIMCRUT, you’ll enjoy a wealth of valuable benefits.

There’s no limit on contributions nor a requirement to make contributions. Contributions can be made at any time, allowing precise tax management. The trust is private and confidential, and assets in the trust are generally protected from creditors. You may designate one or more income beneficiaries for the life of the trust. Administration costs are generally lower than for other plans.

A NIMCRUT enables you to enjoy tomorrow’s wealth, today.

NIMCRUTs have no minimum distribution rules beginning at 70-1/2, and no tax penalties for withdrawals made prior to age 59-1/2. Contributions create valuable tax deductions, for a portion of their value. Earnings grow free from taxation, enabling them to compound much faster over time. A NIMCRUT offers a prudent way to make a gift to the charity of your choice. (You can select the charity when you set up the trust and change it anytime thereafter.)

A Wealth of Benefits

  • Tax deductible contributions
  • No limit on contributions
  • No required contributions
  • Tax-free buildup of assets
  • Low maintenance costs
  • Steady or fluctuating income stream, as desired
  • No requirement to take income
  • Creditor protection
  • One or more income beneficiaries
  • Privacy

A NIMCRUT Case Study

Thomas and Linda Sargent, both in their fifties, plan to retire in about a decade. They have placed $500,000 in a NIMCRUT. They expect it will generate approximately $60,000 annually in their leisure years. At retirement, the Sargents would also like to make sure they have enough liquid capital to purchase a condominium in a retirement community. The trust is to provide the couple the lesser of 6% or the trust’s income each year.

To meet their goals, the trustee purchases investments increasing in value about 7.5% annually, but generating no trust income. In ten years, the value of the trust will be $1,079,462, assuming there have been no distributions. (A return of approximately 7.2% doubles money in ten years.) The Sargents' makeup provision is worth $434,597. At this point, the trustee begins making payments to the couple by altering investments to create trust income.

In year one of retirement, the trust distributes $65,000 to the Sargents - $64,768 is that year’s 6% unitrust payment. The remaining $232 comes from the buildup. Needing money to buy their condominium, the Sargents receive $150,000 in year two - $85,000 is used to buy the condo. ($66,049 is their unitrust payment, $83,951 comes from the excess.) In year three, their payment returns to $65,000, leaving $347,747 of excess buildup.

Note: The trustee must have the discretion to decide when the buildup in the trust becomes "distributable" income. Distributable income must be turned over to income beneficiaries. Normally, all income inside a charitable remainder trust (as opposed to buildup in principal) must be distributed the year it is earned. Careful drafting by experienced professionals is essential with NIMCRUTs.

A Superior Business Tool

NIMCRUTs have become a financial vehicle of choice for many businesses.

Increasingly, professionals and business owners are find the NIMCRUT to be a valuable alternative to a qualified plan. Compare the advantages and you’ll see why:


  • No required employee contributions
  • No limit on contributions
  • No ERISA compliance
  • No trustee liability
  • Laddered taxability of income
  • Private
  • Flexible distributions
  • No tax penalties
  • Tax-deferred compounding
  • Partial deductibility
  • Only income available at retirement
  • No extra taxes

Qualified Plan

  • Required contributions for all workers
  • Limited contributions
  • Costly ERISA compliance
  • Fiduciary liability
  • All regular income
  • Public
  • Required distributions
  • Tax penalties
  • Tax-deferred compounding
  • Full deductibility
  • All funds available
  • Confiscatory taxation on overfunding

Questions and Answers

With proper selection of investments in the trust, you can turn the income spigot on and off.

  • What types of property can I put in a NIMCRUT?

    Various types of property can be placed in a NIMCRUT, such as stocks, bonds, mutual funds, insurance, real estate, art and collectibles.

  • Is the principal inside a NIMCRUT safe?

    Yes. Because the unitrust distributes only trust income, the principal remains intact at all times.

  • How does a NIMCRUT differ from other charitable remainder trusts?

    Like other charitable remainder trusts, a NIMCRUT allows assets to build free from taxation. What makes the NIMCRUT different is that income payments can be made as needed. With proper selection of investments in the trust, you can turn the income spigot on and off. This feature is particularly important if you and/or your beneficiaries have unexpected expenses, such as medical costs.

  • How do you calculate the tax deduction for property placed inside the unitrust?

    The tax deduction equals the property’s fair market value, less the current value of payments to be received from the trust in the future. Generally, the older the donor and the lower the stated distribution rate from the trust, the greater the tax deduction.

    You should use a professional trustee with substantial expertise in charitable trusts.

  • Can I or my beneficiaries receive income for life from a NIMCRUT?

    Yes. You or your beneficiaries can receive payments for life. Payments will vary with the value of the unitrust and will be limited to its trust income in any one year, and shortfalls in early years may be made up in later years.

  • Is a NIMCRUT always irrevocable?

    Yes, a NIMCRUT is always irrevocable and competent administration and accurate record-keeping is especially important. Generally, you should use a professional trustee with substantial expertise in charitable trusts to avoid running afoul of IRS rules on self-dealing, unrelated business taxable income and other matters. Though well-established in law, and risk-free in the hands of professionals, NIMCRUTs are not do-it-yourself projects.

Call Your Financial Advisor Today

To learn more about NIMCRUTs call your financial advisor today. He or she can provide you with the guidance you’ll need to help you decide how a NIMCRUT can meet your specific needs.

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