Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, November 1, 2012

Romney's Use of the CRUT Tax Shelter

Mitt RomneyThe Bloomberg Press discovered that presidential candidate Mitt Romney uses a charitable remainder unitrust (CRUT) as a tax shelter. This trust arrangement greatly favors Romney, considering that he receives the same tax-exempt status that the church has when it receives capital gains on the sale of assets for a profit. This favors Romney because he is guaranteed a payout from the trust's liquid assets before the chartiable organization. In this relationship, the church only receives the remainder of the trust, which is will likely be little if anything.

Some estate planning lawyers have stated that this is common and noted that one of the main benefits of using a CRUT is that it allows the funder to "rent" the church's favorable tax status. One attorney stated that it was a common practice to structure the trust to give as little as possible to the charity while maximizing the amount that the funder would receive. CRUTs work like an annuity providing a stream of payments to the funder of the trust. When the funder of the CRUT passes away, then the charity beneficiary receives the remainder. Congress sought to change this principle by requiring at least 10% of the initial amount that the funder placed within the trust to go to the listed charity. Romney's trust, however, does not have to follow these rules because he made his trust before Congress changed the rule. In other words, his trust was grandfathered so that it is still legal regardless of the fact that his trust does not meet the requirements. 

The author here believes that Mitt Romney's use of the CRUT is indicative of his entire attitude towards taxes. She argues that Mitt Romney will likely use any mechanism that he can to reduce to his taxes, even though his vast wealth is an indirect result of our favorable infrastructure, which is supported by the American taxpayer. In addition, the author argues that this is will provide some explanation as to why Romney has refused to release his tax returns in the past.

See Linda M. Beale, Romney's CRUT Tax Shelter, ataxingmatter, Oct. 30, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.


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Honestly, this particular link is nothing but a shameless political plug. I am disappointed that you even give it the time of day here in FeedBlitz. The blog owner, Linda, CLEARLY is grinding a political ax and/or has NO appreciation for charitable tax & estate planning. Otherwise, she would not be trying to discredit the legitimate use of a CRUT, which is time-tested as a part of the Tax Act of 1969. There is nothing controversial about employing charitable planning, and as a Chartered Advisor in Philanthropy (CAP), I am offended by the dismissive tone of her entire blog post. Hence my conclusion, her comments are very thinly veiled political tirade. I hope FeedBlitz will refrain from such biased postings in the future.

Posted by: John Martin | Nov 2, 2012 11:31:19 AM

Granted the piece has bias, and the comment about possible illegal activities relative to offshore activity is a bit over the top. However, the fact remains that Romney never overcame the perception by those perhaps not having an intimate knowledge of law that he was in some way skirting it. In retrospect, he should have disclosed every page of every tax return on day 1 instead of having the fire smolder throughout the campaign.

Posted by: Brian J. Cohan | Nov 9, 2012 7:58:52 PM

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