What are Charitable Remainder Trusts

Charitable Remainder Trusts: I.R.C. § 170(A), § 170 (C)

In the complex world of financial planning, the Charitable Remainder Trust (CRT) stands out as a powerful tool that balances philanthropic intentions with financial benefits. This type of trust is not only a testament to one’s charitable spirit but also a savvy financial strategy that can potentially enhance an individual’s financial and tax situation.

What is a Charitable Remainder Trust?

A Charitable Remainder Trust is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals. It works by dispersing income to the trust beneficiaries for a specified period and donating the remainder of the trust assets to your chosen charity. This allows you to fulfill your philanthropic goals while enjoying financial benefits during your lifetime.

The trust is set up by transferring assets into it. In return, it pays you or other named beneficiaries a fixed amount annually for a lifetime or a set number of years (not exceeding 20 years). At the end of the term, the remaining assets go to one or more charities of your choice.   

A charitable remainder trust (CRT) is an example of a “split-interest” giving vehicle. Split-interest vehicles are used to designate two beneficiaries: one current and one remainder.

  • The current beneficiary receives an annual payout stream from a trust, typically the donor, during his or her lifetime.
  • The remainder beneficiary receives the assets left in the trust at the conclusion of its term.

How is a Charitable Remainder Trusts a Wealth Strategy?

Tax Advantages:

  • Income Tax Deductions: When you transfer assets into a CRT, you can claim an immediate income tax deduction based on the fair market value of the assets minus the present value of the income interest retained. 
  • Avoidance of Capital Gains Tax: By donating appreciated assets like stocks, businesses, crypto, or real estate to the CRT, you are not responsible for paying capital gains taxes (long or short) when sold within the trust. This is particularly advantageous for those holding highly appreciated assets. 
  • Estate Tax Relief: Since the assets transferred into the trust are removed from your estate, they are not subject to estate taxes, potentially saving significant amounts for your heirs. 
  • Estate Replacement: A portion of the income and tax benefits created from the CRT planning can also be used to fund life insurance. This portion is held in a separate trust, replacing inheritance for your heirs with tax free life insurance outside of the estate. 

Income Potential:

CRTs offer you or other beneficiaries a stream of income, which can be especially useful during retirement. Depending on the structure of the trust, this can be a variable income from a Charitable Remainder Unitrust or a fixed income from a Charitable Remainder Annuity Trust. 

  • Charitable Remainder Annuity Trusts: A charitable remainder annuity trust (CRAT) pays a specific dollar amount each year. The amount is at least 5% and no more than 50% of the value of the corpus (property in the trust) when the trust is established.
  • Charitable Remainder Unitrust: A charitable remainder unitrust (CRUT) pays a percentage of the value of the trust each year to non-charitable beneficiaries. The payments generally must equal at least 5% and no more than 50% of the fair market value of the assets valued annually.

Flexibility and Control:

Donors can choose the type of trust, the term, the beneficiaries, the payout rate, and the charities that will benefit. This control allows donors to tailor their financial and charitable planning according to their personal circumstances and goals.


Annual Gift Tax Exclusion Boost:

  • Current tax-free gift limit per person: $18,000 in 2024.  
  • Married couples: A tax-free gift of $36,000 per beneficiaries.

Expanded Lifetime Gift Tax Exemption:

  • Lifetime exemption hits $13.61 million in 2024.
  • Exceeding the annual limit? No problem—excess deductions from lifetime exemption, no immediate taxes.

Strategic Giving to Non-US Citizen Spouses:

  • Annual tax exclusion for gifts to non-U.S. citizen spouses rises to $185,000 in 2024.

Deadline Alert:

Lifetime estate and gift tax exemption reverts to $5.49 million after 2025 without action.

What assets may be donated to a Charitable Remainder Trust? 

You may use the following types of assets to fund a charitable remainder trust: 

  • Cash 
  • Publicly traded securities 
  • Some types of closely held stock (Note that CRTs cannot hold S-Corp stock) 
  • Real estate 
  • Certain other complex assets 

Is a Charitable Remainder Trust Right for You? 

Deciding whether a CRT is appropriate for your financial strategy requires careful consideration of your financial situation, tax position, and philanthropic desires. Here are some factors to consider:

  • Financial Security: CRTs are best for individuals who have adequate financial security aside from the assets to be placed in the trust. Since the principal is eventually donated, it is not available to your heirs.
  • Asset Types: Individuals with highly appreciated assets that would incur significant capital gains taxes if sold can greatly benefit from a CRT.
  • Philanthropic Intent: A genuine desire to support charitable causes is crucial since the remainder of your trust will benefit the charity or charities you designate.
  • Estate Planning: Those concerned with reducing their taxable estate for the benefit of heirs may find a CRT a useful tool.


In conclusion, Charitable Remainder Trusts offer an exceptional blend of philanthropic fulfillment and financial efficiency. However, they require thoughtful consideration. They should ideally be implemented with the guidance of financial and legal professionals. If the blend of income streams, tax benefits, and charitable giving aligns with your personal and financial goals, a CRT could be an excellent addition to your wealth management strategy.

If you have any questions on Charitable Remainder Trusts or other gifting strategies, call us at 781-235-4426.

Or schedule a meeting with one of our Advisors by clicking HERE for a 15-minute discovery call! 



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