Net Income with Makeup (NIMCRT)
A Net Income with Makeup Charitable Remainder Trust or NIMCRUT
is a type of trust that requires that a fixed percentage (minimum
of 5%) of the annual value of trust assets be credited to
the income beneficiary, or if less, the net income of the
trust for that year, with any deficiencies to be made up in
later years when trust income exceeds the required set percentage
amounts for such years.
If a deferred annuity contract is used to fund a NIMCRUT,
the trustee has discretion as to the timing of distribution
of income, and therefore, unlike other CRTs, a NIMCRUT can
allow for the buildup of income. Using an Annuity as a funding
vehicle for a NIMCRUT allows for greater control of income
and flexibility. Since the trust is exempt from tax, the buildup
is also without tax.
An important note is that, unlike the other types of CRTs,
NIMCRUTs do not allow invasion of principal for the payout
of income. If there is insufficient income to meet the payout,
the income beneficiary must wait until sufficient income exists.
Until such time however, the income beneficiary's "make-up
account" will continue to build. Once income is sufficient,
the income beneficiary will be entitled to the entire buildup
in the "make-up account."
A NIMCRUT is best used for someone who doesn't need immediate
income. Generally, if income is expected to start in 5 years
or longer, a NIMCRUT can be considered. This will make it
more likely that income will be available to meet any payout
Click here for FREE additional information
on a Net Income with Makeup Trust - NIMCUT.
We have also put together a hypothetical case study that
illustrates a NIMCRUT in use. Click
here to view the study as an adobe .pdf file.
Harding Financial Services, LLC
The information contained on this site is for educational
purposes only, it is not intended to be professional tax or
legal advise; consult a tax advisor about your specific situation.