A charitable remainder trust (CRT) is an estate planning tool that combines financial strategy with charitable giving. It allows you to convert appreciated assets into a steady income stream while ultimately supporting a nonprofit of your choice. For many, it offers a unique way to align values with long-term financial planning.
When you transfer assets, like real estate, stocks, or cash, into a CRT, the trust becomes the legal owner. You or other beneficiaries receive income from it for a set period, often for life or up to 20 years. After that term ends, whatever remains in the trust goes to the designated charity. This structure makes CRTs attractive for those who want to support a cause while also generating retirement income and deferring capital gains taxes.
CRTs are tax-exempt, so when the trust sells appreciated assets, no immediate capital gains tax is triggered. This makes them especially useful for people holding concentrated or appreciated investments they want to diversify without a large tax hit. The donor may also qualify for a partial charitable income tax deduction in the year the trust is funded, depending on factors like age, IRS discount rates, and payout terms.
Although the assets in a CRT eventually go to charity, not heirs, this can reduce estate taxes and fulfill philanthropic goals. Some flexibility exists to change the charitable beneficiary over time if your interests evolve. However, the trust is irrevocable, meaning once assets are placed into it, you cannot take them back. Also, the income you receive from the trust is taxable and must be reported annually.
Setting up a CRT can be complex and costly. Legal and administrative fees make it more suitable for those contributing significant assets, generally $100,000 or more. Still, for donors with charitable intent and the need for tax planning and income, CRTs can be a compelling option.
Recent legislation has added new dimensions to CRT planning. For instance, a one-time option now allows certain individuals to fund a CRT directly from an IRA via a qualified charitable distribution. However, other laws may reduce the tax benefits for some high-income donors starting in 2026.
As laws and family circumstances evolve, reviewing your estate plan regularly is essential to determine whether a CRT fits your financial and charitable goals.
Read more: How Charitable Remainder Trusts Fit Into An Estate Plan