A Workaround for the 10-year IRA Rule? Meet the CRUT.

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Main takeaways

• Naming a charitable remainder unitrust (CRUT) as the beneficiary of your IRA allows your heirs to bypass the SECURE Act’s 10-year withdrawal limit.

• Beneficiaries receive smaller, more manageable distributions while the assets continue to grow tax-deferred.

• After the income term ends, the remaining assets go to a charity of your choice—letting you support loved ones and a cause you care about.

• CRUTs can be complex and costly to set up, so they’re generally most useful for high-net-worth families.

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Leaving an IRA to your children or other heirs is a common way to transfer your wealth to the next generation. Thanks to a 2019 law change, however, most non-spouse beneficiaries have to liquidate inherited IRAs within 10 years—a shift that can trigger a big, unexpected tax bill.

But there's a workaround that high-net-worth families are increasingly turning to: the charitable remainder unitrust, or CRUT.

We’ll unpack what a CRUT is, how it works and why it might just be a smart way to sidestep the 10-year rule while doing some good in the process.

The 10-year rule, explained

The SECURE Act, passed in 2019, changed the basic rules for inherited IRAs. Before the law took effect, many beneficiaries could stretch required minimum distributions (RMDs) over their lifetime, minimizing their annual tax liability. That means non-spouse heirs—including adult children—typically have to drain the account within a decade.

The result? Compressed distribution timelines, larger annual withdrawals and, yes, higher taxes.

What is a charitable remainder unitrust?

A charitable remainder unitrust (CRUT) offers a creative way around that hurdle.

Here’s how it works. Instead of naming your kids or other loved ones as the direct beneficiaries of your IRA, you name a CRUT. Once you pass, the IRA gets rolled into the trust, which pays your chosen beneficiary a fixed percentage of the trust’s assets each year—typically for life. (You can also donate certain other assets to a CRUT, including cash, individual securities and real estate.) The annual payments typically have to be at least 5%, but no more than 50%, of the assets’ fair market value. 

After that person dies—or after a set number of years—whatever’s left in the trust goes to a charity or charities that you’ve selected.

How the CRUT gets around the 10-year limit

The key here is in how the IRS treats CRUTs. Because the IRA gets transferred to a charitable trust—and not to an individual—the 10-year liquidation rule doesn’t apply. Instead, the trust can distribute income to the beneficiary over their lifetime or for a set term of up to 20 years.

That extended payout timeline means smaller annual distributions and a lighter tax burden. Meanwhile, the assets inside the trust continue to grow tax-deferred.

The bottom line? A CRUT turns what would be a tax-heavy inheritance into a long-term income stream.

Who might consider using a CRUT?

These trusts tends to make the most sense if:

• You have a large IRA (generally $500,000 or more)

• You want to provide income to your heirs while minimizing taxes

• You’re okay with a charity eventually receiving the remainder of the assets

For smaller IRAs or beneficiaries who’d prefer a lump sum, however, a CRUT might be too complex or restrictive to make sense.

Pros and cons of a CRUT

A CRUT can be a powerful estate planning tool in certain situations, although it’s not the perfect solution for every family. Here’s how it stacks up:

Pros

• Avoids the 10-year liquidation rule

• Creates a lifetime (or term-based) income stream for beneficiaries

• Grows tax-deferred inside the trust

• Leaves a legacy for a charitable cause

Cons

• Can be complex to set up and administer

• Requires legal and tax expertise

• Ultimately leaves less to heirs, since the remainder goes to charity

Setting up a CRUT

You’ll need an estate planning attorney and possibly a financial advisor to help design and fund the CRUT. The trust has to meet specific IRS requirements, including rules about payout percentages and how much must be left for charity (typically at least 10% of the initial value).

You can structure the payout to match your goals—for example, paying your child 5% of the trust’s assets each year for life. But remember: the lower the payout rate, the more that ends up going to charity down the line.

The upshot

If you’re looking for a tax-efficient way to pass on IRA wealth without running afoul of the 10-year rule, a charitable remainder unitrust deserves a serious look. If you choose this path, however, you don’t want to go it alone. Setting up a CRUT takes planning, paperwork and professionals who know what they’re doing.