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Charitable Remainder Trust (CRT)

An irrevocable trust that provides income to the donor for a specified period, with the remaining assets transferring to a designated charity at the end of the term, providing immediate tax deductions and capital gains avoidance.

Vehicle Source: Billionaire Wealth Strategies Verified: 2026-04-07

Definition

A Charitable Remainder Trust is an irrevocable trust that accomplishes three goals simultaneously: avoiding capital gains tax on appreciated assets, providing a stream of income to the donor, and generating an immediate charitable income tax deduction. The trust pays income to the donor (or other beneficiaries) for a term of years or for life, then distributes the remaining assets to a designated charity.

How It Works

The donor transfers appreciated assets (stocks, real estate, business interests) into the CRT. The trust sells the assets without triggering capital gains tax because the trust itself is tax-exempt. The full, untaxed proceeds are reinvested, creating a larger income-producing base than would exist after a taxable sale.

The donor receives annual distributions (typically 5-8% of trust assets for a CRUT, or a fixed amount for a CRAT) and claims an upfront charitable deduction based on the present value of the future charitable gift.

Two primary types exist:

CRAT (Charitable Remainder Annuity Trust): Fixed annual payment, no additional contributions allowed
CRUT (Charitable Remainder Unitrust): Payment based on a percentage of trust value (recalculated annually), additional contributions permitted

When Entrepreneurs Use This

Concentrated stock positions: Diversifying a single-stock holding without triggering capital gains
Business sale proceeds: Directing appreciated business interests into a CRT before sale
Real estate: Transferring highly appreciated real estate that would trigger massive capital gains
Philanthropic entrepreneurs: Those who want to support causes while maintaining income

Dew Wealth Perspective

One Dew Wealth client placed commercial real estate holdings into charitable remainder trusts. The strategy allowed income from the properties during his lifetime while ensuring the assets would benefit his synagogue after his passing. For him, Make Rich Real^® was not about maximizing net worth but about aligning wealth with values. The CRT provided the vehicle to achieve both tax efficiency and philanthropic impact.

Frequently Asked Questions

Do I lose control of the assets?

Yes. The transfer to a CRT is irrevocable. However, the donor can serve as trustee and maintain investment management decisions within the trust's charitable purpose.

How is the charitable deduction calculated?

The deduction equals the present value of the charity's remainder interest, based on the payout rate, the term, and the IRS Section 7520 discount rate. Higher payout rates reduce the deduction; longer terms increase it.

Can I change the charity?

If the trust document permits, the charitable beneficiary can be changed during the trust term.

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