A charitable remainder trust (CRT) is a tax-exempt investing vehicle that allows donors to pursue philanthropic goals while still receiving an annual income.
What you need to know
Charitable Remainder Trusts are tools to give large amounts of money to charity.
A CRT is irrevocable. This means that the trust cannot be changed once it has been created.
There are two many types of CRTs. CRUTs & CRATs.
A Charitable Remainder Unitrust, or CRUT, is the most common type of CRT. This trust pays out a percentage calculated from the market value of the trust each year.
A Charitable Remainder Annuity Trust, or CRAT, pays out a fixed percentage based on the initial market value of the trust at the time of funding.
Charitable Remainder Trusts are essentially a way to give away a large portion of your money in an act of charity while still pulling out enough to live on, and then after you pass, any money remaining in the CRT usually goes to the same charity.
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Learn moreJane was a successful author with a net worth of roughly $25 million. On her seventieth birthday, Jane creates a charitable remainder trust (CRT). Jane funds the trust with $10 million. The trust agreement states that Jane can receive 10% of the trust’s market value each year.
In the trust agreement, Jane names her local "Get Out The Vote" chapter as the recipient, specifically known as the charitable beneficiary.
Jane will receive a tax deduction from the initial funding amount, as the IRS deems that as a charitable donation.
Each year, Jane receives 10% of the trust’s market value as income.
After fifteen years, Jane passes away. The remaining funds in the trust go to the Get Out The Vote chapter and are not included in Jane’s taxable estate.
In collaboration with
Aaron Schnoor
Aaron Schnoor is an Assistant Vice President and Trust Officer at Wells Fargo Wealth Management.
Aaron received his undergraduate degree in Trust and Wealth Management from Campbell University in North Carolina, along with a minor in Financial Planning. Aaron continued his education with an MBA in Financial Services, also from Campbell University.
Aaron frequently writes as an industry expert on fiduciary topics related to trusts, estate settlement and generational wealth management. His work has appeared in The New York Times, Forbes, the Trust Education Foundation and many other publications.
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