On the roadmap
Charitable Remainder Trust.
The classic move when you have appreciated stock or real estate, want income from it for life, and care about a charitable cause.
CRTs are powerful but specific. They're for people who own a highly-appreciated asset they don't want to pay capital gains tax on, want income from it for life, and have charitable intent. If all three apply, a CRT delivers a tax deduction now, an income stream for years, and a charitable legacy at the end. If even one is missing, a simpler tool works better.
What's inside
The full CRT package.
CRAT — Charitable Remainder Annuity Trust
Pays a fixed dollar amount each year (e.g., $40,000/year for life). Predictable income; works best when payouts and interest rates are stable. No additional contributions allowed after funding.
CRUT — Charitable Remainder Unitrust
Pays a fixed percentage of trust assets revalued annually (e.g., 5% of assets). Income grows with the trust. Additional contributions allowed. Most common modern variant.
Term: lifetime or fixed
Pay yourself, you-and-spouse, or another person for life. Or for a fixed term up to 20 years. After the trust ends, the remainder goes to your named charities.
Capital gains deferral
When you contribute appreciated stock or real estate, the trust sells it tax-free. Your capital gains are spread across your annual payouts as ordinary income — typically a much better outcome than a one-time sale.
Immediate income-tax deduction
You deduct the present value of the charity's remainder interest in the year you fund the trust. Calculated using IRS Section 7520 rates.
Annual IRS Form 5227 filing
CRTs are split-interest trusts and must file annually with the IRS. The Trustwise CRT product includes an annual reminder and a checklist your tax professional can run with.
The math, in plain English
A worked example.
You bought $50k of a tech stock 20 years ago. It's now worth $1.2M. If you sell it outright, you owe roughly $232k in federal long-term capital gains tax (assuming the 20% top rate plus 3.8% NIIT), netting you about $968k.
Instead, you fund a 5% CRUT with the stock. The trust sells it tax-free. You receive 5% of the trust value annually for life. You also get an immediate income-tax deduction of roughly $300k (the present value of the charity's remainder interest). Your annual payouts are taxed as a mix of ordinary income, capital gains, and other categories — but spread out, often at lower brackets than the one-time sale would have triggered.
At your death, the remaining trust value goes to the charity (or charities) you named. The lifetime payouts plus the upfront tax deduction usually exceed what you'd have netted from a straight sale — and the charity receives a meaningful gift.
Numbers illustrative. Actual outcomes depend on Section 7520 rates at funding, payout rate, beneficiary ages, and the trust's investment performance. Always run real numbers with a tax pro before funding.
Common questions
- When does a CRT actually make sense?
- Three things have to be true: (1) you have a highly appreciated asset (stock, real estate, business interest) that would generate big capital gains if sold outright, (2) you want income from it for life or a term of years, and (3) you have charitable intent — at least 10% of the value goes to charity at the end. Without all three, simpler tools work better.
- How much income can the CRT pay me?
- Within IRS limits: at least 5%, at most 50% of the trust's value annually, and the present value of the remainder going to charity must be at least 10% of the initial contribution. So if you fund a CRUT with $1M, the charity ultimately gets at least ~$100k of present value, and you get the rest as income over time.
- Is this irrevocable?
- Yes. Once you fund a CRT, you can't change beneficiaries or take the assets back. The income stream is yours; the eventual charity is locked in. CRTs are used precisely because the irrevocability locks in the tax benefits.
- What if I die before the term ends?
- If the CRT pays you for life, it ends at your death and the remainder goes to charity. If it pays you-and-your-spouse, it continues for the surviving spouse, then ends. If it's a fixed term, it can continue paying your designated beneficiary until the term ends.
- Can I add more assets later?
- Only if it's a CRUT. A CRAT must be funded once at creation. CRUTs can accept additional contributions over time, which is why most modern CRTs are CRUTs.
This one needs a tax pro alongside us.
CRTs are inappropriate as pure DIY — the IRS reporting alone requires Form 5227 annually. We'll offer a CRT product paired with a tax-professional referral, not solo. Tell us you're interested.
If you're not sure a CRT fits, take the will-or-trust quiz.
The quiz can help orient you. CRTs come into play when both 'want a trust' and 'want charitable benefit' answers are strong.