Net Income Makeup Charitable Remainder Unitrusts Nimcruts

Definition of "Net income make-up charitable remainder unitrusts (nimcruts)"

Type of charitable remainder trust (CRT) that pays interest income for life or for a specified term to a non charitable beneficiary. The remainder of the interest is received by a charity. This trust pays a specified percentage of its fair market value with the beneficiary receiving only the interest and dividends earned by the trust for the current year. The trust does not pay out any unrealized income. If this payout of interest and dividends is less than the specified percentage as stated in the trust documents, the shortage is accumulated and paid to the beneficiary at some future date (the net income make-up provision goes into effect). For example, assume that the trust earns 6% in interest and 16% in unrealized capital gains during the current year. The beneficiary receives only the 6% earned interest with the 16% in unrealized capital gains being accumulated for distribution to the beneficiary at a future date when the recognized income in the trust is sufficient to affect the payout. In those situations where the trust has no income from interest and dividends, the shortage owed to the beneficiary is accumulated for future distribution to that beneficiary.