Toward an Optimal Asset Allocation for Charitable Remainder Trusts

Abstract

Economic theory, relevant research, and a Monte Carlo model are used to develop investment guidelines for charitable remainder unitrusts (CRUTs). Investment for CRUTs should involve a significant share of equities, with as much as 70 percent allocated to equities for long-term CRUTs. Adjusting allocations as payout beneficiaries get older is unnecessary given the nature of CRUTs, donors, and simulated outcomes. The authors propose that a fixed asset allocation be used instead of one that changes over time and that CRUTs with higher payouts should use a more aggressive asset allocation (more equities).