Using a Charitable Remainder Trust for Income, Tax Savings, and Giving

• A charitable remainder trust turns appreciated assets into steady income for you. The remaining assets go to a charity you select.
• These trusts help reduce capital gains taxes and offer lifetime income. They also provide a charitable deduction for added benefit.
• You transfer assets into the trust and receive regular income for life or a set time. After that, the remainder goes to charity.

What Is a Charitable Remainder Trust?

A charitable remainder trust (CRT) is a planning tool that enables you to receive steady income for yourself or a loved one and support a charitable cause you care about in the future.

Think of it like planting a tree. You place an asset, like stock or real estate, into the trust. That asset is the seed. Over time, it grows and produces income. You or a beneficiary can enjoy that income yearly for life or a set time.

Then, when the term ends, the remaining value (the tree itself) goes to the charity of your choice.

It’s a great way to turn appreciated assets into ongoing income, reduce your tax burden, and make a meaningful gift, all in one plan.

CRTs are often used by people who have highly appreciated assets they want to put to work, but also want to retain income for retirement or estate planning. However, they’re irrevocable, so it’s best to use them when you’re confident in your giving goals and long-term financial picture.

Benefits of a Charitable Remainder Trust

A charitable remainder trust is more than just a way to give. It’s a smart strategy that can serve multiple financial goals at once. Here’s what makes it so powerful:

• Steady income for life or a set term – You or a designated beneficiary receives regular income from the trust, which is helpful for retirement planning, bridging income gaps, or supporting a family member.
• Immediate charitable deduction – When you fund the CRT, you’re eligible for a partial tax deduction based on the value of the remainder gift to charity.
• Avoid capital gains taxes – Donating appreciated assets (like stock or real estate) to a CRT allows the trust to sell them without triggering capital gains taxes, potentially saving you a significant amount.
• Reduce estate taxes – Because the assets move out of your estate, a CRT can help lower potential estate tax exposure, which is especially useful in larger estates.
• Support causes you care about – At the end of the trust term, the remaining assets go to a nonprofit organization of your choosing, turning your plan into a lasting impact.
• Flexible giving options – CRTs can be structured to benefit one or more people, support a single charity or several, and align with both income needs and charitable intent.

How a Charitable Remainder Trust Works (Step-by-Step)

Setting up a charitable remainder trust involves a few important steps, but with the right financial planning, the process is smooth. Here’s how it typically works:

1. Decide What Assets to Contribute

The first step is choosing which assets to place in the trust. CRTs are especially useful for highly appreciated assets, like publicly traded stock, real estate, or even a closely held business, because the trust can sell them without triggering capital gains taxes.

2. Work with an Attorney to Create the Trust

A CRT is a legal structure, so you’ll have to work with an estate planning attorney to draft the trust document. You’ll name:

• The income beneficiaries (often yourself or a family member)
• The charity or charities that will receive the remainder
• The trustee, who will manage the assets and distributions

3. Transfer the Assets to the Trust

Once the trust is created, you transfer your chosen assets into it. At that point, the assets are no longer part of your estate, which can help with estate tax planning. You’ll also become eligible for a charitable income tax deduction, based on the projected remainder going to charity.

4. The Trust Sells the Assets Tax-Free

If the CRT sells appreciated assets, it does so without incurring capital gains tax, unlike if you sold them personally. This means more of the value stays intact to generate income and grow within the trust.

5. You Receive Income for Life or a Set Term

The CRT pays income to you (or another beneficiary) either for your lifetime or for a set number of years (up to 20). The income amount is either a fixed annuity or a percentage of the trust’s value, depending on how the trust is structured.

6. Remaining Assets Go to Charity

At the end of the trust term, the remaining balance (what’s left in the trust) is distributed to the charity or charities you’ve named. That’s where the “charitable remainder” part comes in.

Who Should Consider a Charitable Remainder Trust?

A charitable remainder trust isn’t the right fit for everyone, but for certain people, it can be a highly effective part of a long-term financial management plan. You might want to consider a CRT if:

• You have highly appreciated assets – Do you plan to sell stocks, investment properties, or a business? A CRT can help you avoid capital gains taxes and convert those assets into income.
• You’re in a high-income year or nearing retirement – CRTs are often used during years with a major tax event, such as the sale of a business or investment, to help offset taxable income while creating future cash flow.
• You want income now and charitable impact later – CRTs let you support your favorite causes without giving away everything immediately. You receive income during your lifetime, and the charity receives what’s left later.
• You’re looking for a way to reduce estate taxes – Because CRT assets are removed from your taxable estate, they can help reduce potential estate tax exposure.
• You want to include charitable giving in your estate plan – CRTs are a structured way to build charitable intent into your legacy, with flexibility around how and when funds are distributed.
• You’re supporting a spouse, partner, or other loved one – CRTs can provide income for one or more individuals before the remainder goes to charity, which makes them useful for caregiving situations or overcoming career changes.

Things to Know Before You Set One Up

A charitable remainder trust can be a tax-efficient giving strategy, but like any financial tool, it’s important to understand the fine print before moving forward.

• It’s irrevocable – Once you transfer assets into a CRT, you can’t take them back. You’re locking in the plan, so it’s best for people who are confident in their giving and income goals.
• You’ll need professional support – CRTs require legal drafting and ongoing administration. You’ll want to work with an estate planning attorney and a financial advisor to structure it properly and stay compliant with IRS rules.
• There are rules around income payouts – The IRS sets guidelines for how much income the trust can pay out. The amount you receive depends on how the CRT is structured (as a fixed annuity or percentage of trust assets).
• The charitable remainder must meet a minimum value – To qualify as a CRT, the projected remainder going to charity must be at least 10% of the initial value of the assets transferred in.
• Your choice of trustee matters – The trustee manages the assets, tracks distributions, and ensures everything stays compliant. You can name a professional trustee or a trusted individual, but it’s a serious responsibility either way.
• It’s a long-term commitment – A CRT isn’t something to set up casually. It works best as part of a broader financial, tax, and estate plan.

Bring Strategy and Heart Together

A charitable remainder trust is a great way to align your giving goals with your financial future. For the right person, it can offer steady income, meaningful tax advantages, and a powerful way to support the causes that matter most.

If you’re nearing a major life or financial shift, like retirement or a business sale, consider your options carefully. A Charitable Remainder Trust (CRT) may be worth exploring as part of your overall estate plan.

Interested in exploring whether a charitable remainder trust makes sense for you? Book a short online meeting to ask questions, learn how it works, and see how it might fit into your financial goals.