Charitable Remainder Trust (CRT)

A Charitable Remainder Trust provides current income to non-charitable beneficiaries (typically the grantor and spouse) for a term of years or for life, with the remainder passing to one or more charities. A CRUT pays a fixed percentage of trust assets revalued annually (typically 5% to 7%); a CRAT pays a fixed dollar amount. The grantor gets an immediate charitable deduction for the actuarial present value of the remainder interest, typically 10% to 30% of the contribution. The trust itself is tax-exempt, so appreciated assets can be sold inside the CRT without triggering immediate capital gains.

Example: an engineer contributes $2 million of concentrated employer stock with a $200,000 basis to a CRUT paying 5%. She avoids immediate capital gain on the $1.8 million appreciation and receives a $400,000 charitable deduction. The CRT sells the stock, diversifies, and pays her $100,000 per year (5% of $2 million revalued). At her death, the remainder passes to her donor-advised fund.

Common mistake: funding a CRT right before a planned full sale. The 10% minimum remainder requirement and IRS exhaustion tests can fail if payout rate is set too high.

CRTs matter at IPO lockup expiration with concentrated stock, at philanthropic goals, and at income generation in retirement.