Charitable Remainder Trust

A charitable remainder trust — commonly called a CRT — splits an asset's future value into two parts: an income stream that goes to non-charitable beneficiaries (often family members) during a defined term or for the lifetimes of named individuals, and a "remainder" interest that passes to a qualified charity when the trust ends. The donor receives a partial charitable deduction at the time of funding, the size of which depends on actuarial calculations about how much will eventually reach the charity. Because those calculations depend on rates and life expectancies that change, families must work with qualified attorneys and CPAs to understand the specific figures.

CRTs are particularly relevant when a family holds a highly appreciated asset — such as stock in a company that has grown substantially or real estate bought decades ago — that they want to sell. Contributed to a CRT, that asset can often be sold inside the trust without triggering the same immediate capital-gains treatment that a direct sale would cause, though the income distributions are taxed as they are received according to a specific ordering rule. This is a concept-level observation; actual tax consequences depend heavily on jurisdiction and current law.

Imagine a retired surgeon who holds a large block of appreciated stock she no longer wants concentrated in her asset allocation. She funds a CRT with that stock, the trust sells it, and she receives an income stream for the rest of her life. At her death, the remainder passes to a university she has supported for years. A CRT pairs naturally with a private foundation or a donor-advised fund named as the charitable remainder beneficiary, allowing the family to continue directing how the charitable dollars are used after the trust terminates.