Charitable Remainder Trust (CRT)

A Charitable Remainder Trust (CRT) splits an asset into two interests: an income stream paid to living beneficiaries (typically the grantor and perhaps a spouse) for a term of years or for life, and a "remainder" that passes to charity when the income period ends. Because the charity ultimately receives the remainder, the trust itself is generally exempt from income tax, which can be meaningful when highly appreciated assets are contributed — the trust can sell them without an immediate capital-gains bill and reinvest the full proceeds.

Families sometimes consider CRTs when they hold a low-basis concentrated asset — illustratively, stock in a company they founded — that produces little current income but carries a large embedded gain. Contributing that asset to a CRT, taking a partial charitable deduction, and then receiving a diversified income stream is a pattern worth understanding, even if its suitability depends entirely on individual circumstances. See concentrated stock positions for related context.

A CRT is not a charitable gift in the conventional sense: the grantor retains substantial economic benefit during the income period. The IRS requires that the remainder interest meet a minimum present value to qualify. Two main variants exist — the annuity trust (fixed dollar payout) and the unitrust (percentage payout) — and they behave quite differently. A qualified attorney and CPA must evaluate whether a CRT is appropriate for any particular family's tax and philanthropic situation.