What Is a Charitable Remainder Trust?

A tax-exempt irrevocable trust, the charitable remainder trust, or CRT, is designed to reduce the taxable income of individuals by:

  • Distributing income to its beneficiaries.
  • Donating the rest to a designated charity.

A charitable remainder trust is a “split-interest” giving trust.

With this type of “split-interest” giving trust, a trustor can make contributions, be eligible for a partial tax deduction, and donate remaining assets.

There are two types of CRTs:

Charitable Remainder Annuity Trusts (CRAT)

  • Require payments made to designated individuals for their lifetimes or a fixed term (20 years or less).
  • Based on fixed percentage of the original trust assets.
  • No additional contributions.

Charitable Remainder Unitrusts (CRUT)

  • Require payments made to designated individuals for their lifetimes or a fixed term (20 years or less).
  • Based on fixed percentage of the fluctuating value of the trust assets.
  • Additional contributions allowed, either during
    lifetime or by will.

Key Benefits of a Charitable Remainder Trust

A charitable remainder trust preserves the value of highly appreciated assets.

Long-term appreciated assets, non-income-producing property included, a charitable remainder trust allows for the addition of that property to the trust. The property is exempt from tax when the trust sells. Donating the assets in-kind to the CRT preserves the full fair market value. This means more money for the income and charitable beneficiaries.

A charitable remainder trust affords income tax deductions.

With a CRT, there is potential to take a partial income tax charitable deduction the trust is funded. This deduction is based on a calculation on the remainder distribution to the charitable beneficiary.

A charitable remainder trust is tax exempt.

A tax-exempt irrevocable trust, the charitable remainder trust, or CRT, is designed to reduce the taxable income of individuals by:

  • Dispersing income to the beneficiaries of the trust for a specified period of time.
  • Donating the remainder of the trust to the designated charity.

The CRT’s investment income is tax exempt, making it a good option for asset diversification. Investors can consider donating low-basis assets to the trust. When sold, no personal income tax is generated which eliminates the capital gains tax on the sale of the asset. It is important to note, the named income beneficiary will pay income tax on the income stream received.


Contact Us

If you are ready to set your charitable remainder trust up or if you have any questions, please don’t hesitate to contact us. We look forward to working with you!


Other Trusts

Charitable Remainder UniTrusts (CRUT)

This type of CRT is based on a fixed percentage of the fluctuating value of the trust assets. Additional contributions are allowed.

Charitable Remainder Annuity Trusts (CRAT)

This type of CRT is based on a fixed percentage of the original trust assets. No additional contributions are allowed.

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