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 requirements.

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.