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§ 12.1 DEFINITIONSpolicy generates adequate income, not only begin to pay the income interest beneficiaryor beneficiaries the full amount of the determined unitrust payments, but alsomake payments that make up for the distribution deficiencies in prior years. 19 Thistype of trust can thus make catch-up—or make-up—payments once the nonincome-producingasset is sold. In this case, the unitrust is determined under thenet-income method, with that amount also including any amount of income thatexceeds the current year’s fixed percentage amount to make up for any shortfall inpayments from prior years when the trust’s income was less than the fixed percentageamount. This net-income make-up CRUT is the NIMCRUT. 20The IRS published the following comment about NICRUTs and NIMCRUTs:The NIMCRUT is commonly used when the donor wants to place propertythat does not produce regular income and is not readily marketable into acharitable remainder unitrust. Grantors often use a NIMCRUT to hold realestate and stock or other interests in a closely held business. If the grantorwere to donate only unimproved real estate to a regular unitrust, the trustwould earn no income and part or all of the real estate would need to be soldin order to make the fixed payment to the noncharitable recipient. Thiswould probably not achieve the grantor’s goal, which most likely was tohold the property in trust while it appreciated. By using a NIMCRUT, thepayment to the income beneficiary is $0.00, the lesser of the unitrust percentageamount or the trust accounting income. An expensive and, perhaps,fruitless effort to sell part of the trust property is avoided. In this scenario,either a NICRUT or a NIMCRUT will do. 21The fourth—and newest—type of CRUT is the flip unitrust (FLIPCRUT). Thegoverning instrument of a FLIPCRUT provides that the CRUT will convert (flip)once from one of the income-exception methods—the NICRUT or NIMCRUT—to the fixed percentage method—the SCRUT—for purposes of calculating theunitrust amount. 22 The conversion is allowed, however, only if the specific dateor single event triggering the flip—the triggering event—is outside the control of,or not discretionary with, the trustee or any other person or persons. 23Usually, the donor or donees to a CRT are an individual or individuals.There are no restrictions as to the types of persons who can be donors to a CRT,as long as the CRT requirements are satisfied. Thus, if an income interest beneficiaryis to be a person other than a human being, such as a corporation, theincome interest payment period must be for a term of years (not in excess of 20years). The IRS recognized situations in which a partnership was a donor to aCRT 24 and a trust was a donor to a CRT. 25A donor to a CRT must transfer property (which can be or include money) tothe trust and contribute an irrevocable remainder interest in the property to or forthe use of a qualified charitable organization, retaining for himself or herself, orcreating for another beneficiary or beneficiaries, an income interest in the transferredproperty. The property may be real or personal, tangible or intangible.19 IRC § 664(d)(3)(B).20 Reg. § 1.664-3 (a)(1)(i)(b)(2). The make-up amount does not have to be treated as a liability when valuing theassets of a NIMCRUT.21 IRS Exempt Organizations Continuing Professional Education Program Textbook for Fiscal Year 2001, at 87.22 Reg. § 1.664-3(a)(1)(i)(c).23 Reg. § 1.664-3(a)(1)(i)(c)(1).24 Priv. Ltr. Rul. 9419021.25 Priv. Ltr. Rul. 9821029. 409