NIMCRUT for High-Net-Worth Individuals: How Does It Work?

For high-net-worth individuals, a Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT) gives you a way to support causes you care about while creating income, reducing taxes, and building wealth for both you and your chosen charities.

A NIMCRUT can be a smart financial planning strategy, but there are important nuances that you should be aware of. Here's everything you need to know about Net Income with Makeup Charitable Remainder Unitrusts (NIMCRUTs).

What Is a NIMCRUT?

A NIMCRUT is a special type of charitable remainder trust that allows you to donate assets to charity while receiving income during your lifetime. It lets you donate assets now, claim a current tax deduction, receive variable income during your lifetime, and direct the remaining assets to charity later.

Unlike a standard Charitable Remainder Unitrust (CRUT) that pays a fixed percentage of the trust's value regardless of performance, a NIMCRUT only distributes what the trust actually earns.

This means if the trust investments generate 3% income but your stated percentage is 5%, you only receive 3% that year. However, the 2% difference goes into a "make-up account" that you can tap into during years when the trust performs better.

Many high-net-worth individuals use NIMCRUTs for retirement planning and tax management.

How Does a NIMCRUT Work?

A NIMCRUT trust works by letting you donate assets to charity while keeping the income those assets generate during your lifetime.

You start by placing assets such as stocks, real estate, or business interests into the trust. Right away, you get a tax deduction for part of what you contributed.

Each year, the trust pays you based on what it earns, up to a set percentage of its total value. When the trust earns less than this percentage in any year, the shortfall gets tracked in a "make-up account." During years when the trust performs better, you can receive these stored make-up amounts.

After your lifetime ends, whatever remains in the trust goes to your selected charity.

What Are the Benefits of NIMCRUT?

NIMCRUTs offer concrete advantages for high-net-worth individuals:

Immediate tax deductions: You get a charitable deduction in the year you fund the trust, reducing your taxable income. The deduction amount is calculated based on the present value of the remainder interest that will eventually go to charity. The higher the IRS interest rate at the time of funding, the larger your deduction will be.
Income timing control: You can minimize your income during high-earning years and increase it later when you need it. This proves especially valuable when you're in your peak earning years and don't need additional income that would be taxed at your highest marginal rate.
Capital gains tax avoidance: Transferring appreciated assets to the trust lets you avoid the immediate capital gains taxes you would pay by selling those assets. When the trust eventually sells these assets, it pays no immediate capital gains tax.
Make-up provision: The make-up account lets you "store" income for future years. This unique feature effectively creates a tax-deferred reservoir of funds. For example, if your NIMCRUT has a 5% stated payout but only earns 3% for several years, the 2% difference accumulates in your make-up account. Years later, you can access these funds when you need them.
Charitable giving: Your chosen charitable remainder beneficiary receives funding after your lifetime. The charity's eventual benefit often grows a lot over the life of the trust because of the tax-free growth. You can support causes you care about even after your death.

Overall, a NIMCRUT trust can be a great option for high-net-worth individuals who have appreciated assets, want current tax deductions, and would like to support charitable causes.

What Are the Downsides of a NIMCRUT?

With NIMCRUTs, there are also a few important limitations to consider:

Irrevocable structure: NIMCRUTs are irrevocable trusts, which means that you can't change your mind and take the assets back. You'll maintain some control as trustee and can change the charitable beneficiary, but the decision to fund the trust can't be undone.
Partial deduction only: Your charitable deduction is limited to a portion of the assets' value, not the full amount. The deduction represents only the present value of what the charity will eventually receive, which is less than your contribution.
Trust's income: You only receive income the trust generates, which could be less than what you expect if market conditions are poor. Standard CRUTs pay a fixed percentage regardless of performance, but your NIMCRUT distributions depend on what the trust produces. During market downturns or low-interest environments, this could result in minimal distributions.
Reduced inheritance for heirs: Assets that you place in a NIMCRUT go to charity, not to your children or other heirs. If you want to pass down assets to your children, you'll need to balance NIMCRUT funding with other estate planning tools.
Minimum payout requirements: RS rules require a minimum percentage (usually 5%) to be payable to you each year. Although actual payments depend on trust income, the stated payout percentage must be at least 5% of the trust's net fair market value.

A NIMCRUT may not be the best option for you if you need guaranteed income regardless of market performance, want to maintain access to your principal, and wish to pass down money to family instead of charity.

Related Article | How to Pass Money to Heirs Tax-Free

What Is the Difference Between CRUT and NIMCRUT?

The main difference between a standard CRUT (Charitable Remainder Unitrust) and a NIMCRUT is how these trusts distribute income to you.

A CRUT pays you a fixed percentage of the trust's value each year, regardless of how the investments perform. For example, with a 5% CRUT on $1 million, you'll receive $50,000 the first year. If the trust grows to $1.1 million the next year, you'll receive $55,000 (5% of the new value).
A NIMCRUT only pays you the actual income the trust generates, up to that same fixed percentage. Using the same example, if your 5% NIMCRUT only earns 3% ($30,000) in income that year, you'll only receive $30,000 instead of $50,000. The $20,000 difference goes into a "make-up account" that you can access in future years when the trust earns more than 5%.

When trying to decide between a NIMCRUT vs CRUT, keep in mind that CRUTs are typically better for people who need a predictable income now. NIMCRUTs work better for those who want to minimize income during high-earning years and increase it later.

NIMCRUT Example

Let's imagine you transfer $1 million of appreciated stock to a NIMCRUT with a 5% stated payout rate. This gives you an immediate tax deduction and lowers your income taxes.

During your pre-retirement years:

You direct investments toward growth assets with minimal dividends
The trust grows to $1.8 million while generating only 2% income
You receive just $20,000 annually (2% of the trust value)
The 3% difference between the stated rate (5%) and actual payouts (2%) builds up in your make-up account

After 10 years, your make-up account has accumulated about $350,000. When you retire, you shift to income-producing investments.

In retirement, your trust now generates 6% income annually. You receive 5% of the trust value ($90,000 in your first retirement year) plus make-up distributions.

Without the NIMCRUT, you would have paid capital gains tax on selling your stock and received taxable distributions during high-income years when you didn't need them.

Are Charitable Remainder Trusts a Good Idea?

There are different types of Charitable Remainder Trusts, including Charitable Remainder Annuity Trust (CRAT), Charitable Remainder Unitrust (CRUT), and Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT).

They work best for high-net-worth individuals who want to combine charitable giving with reducing their tax burden. When it comes to NIMCRUTs specifically, they work best when:

You're in your highest earning years and want to minimize additional taxable income
You need flexibility to control when you receive distributions
You own highly appreciated assets like stocks or real estate
You have genuine charitable intentions

If you need consistent, guaranteed income right away, regardless of investment performance, a standard CRUT might be a better fit than a NIMCRUT.

The Bottom Line

A NIMCRUT can be a smart financial strategy for high-net-worth individuals who want to support charities. They work by giving you an immediate tax deduction, generating income during your lifetime, and going to charity after you die.

Before establishing a NIMCRUT, consult with a qualified financial advisor, tax professional, or an estate planning attorney. A professional can analyze your specific financial situation and help you understand if a NIMCRUT aligns with your goals.