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Charitable Remainder Trust: Income, Then Charity

A charitable remainder trust pays you an income for a set number of years or for life, and then gives whatever is left to a charity you choose. In return, you get a partial tax deduction now, and the trust can sell appreciated assets without owing capital gains tax, which leaves more money working to produce your income.

Settled Estate cover: charitable remainder trust explained
By Settled Estate Editorial Team

The Short Answer

A charitable remainder trust is the go-to tool for someone holding a highly appreciated asset, such as stock or property, who wants income, a tax break, and to support a cause. Sell the asset yourself and you owe capital gains tax. Put it in an irrevocable charitable remainder trust and the trust sells it tax-free, pays you an income from the full proceeds, and sends the remainder to charity at the end.

How It Works

  1. You transfer appreciated assets into the trust and name yourself (or someone else) as the income beneficiary and a charity as the remainder beneficiary.
  2. The trust sells the assets. Because it is tax-exempt, no capital gains tax is due, so the full amount stays invested.
  3. The trust pays you income for a term of up to 20 years or for life.
  4. You take a partial charitable income-tax deduction up front, based on the value the charity is projected to receive.
  5. When the term ends, the remaining assets go to the charity.

The assets also leave your taxable estate, which can help larger estates.

CRAT vs. CRUT

CRAT (annuity trust)CRUT (unitrust)
Your payoutA fixed dollar amount, set at the startA fixed percentage of the trust value, recalculated yearly
If investments growYour income stays the sameYour income rises
Add assets laterNoUsually yes
Best forPredictable, steady incomeGrowth and inflation protection

Versus a Lead Trust or a DAF

A charitable lead trust is the mirror image of a remainder trust: the charity receives the income first, and your heirs receive what is left at the end, which suits families focused on passing assets to the next generation with a tax benefit. A donor-advised fund is simpler and cheaper and lets you recommend grants over time, but it does not pay you income. A charitable remainder trust is the right pick when you want an income stream and a way to spread the gain on an appreciated asset, and it is worth building with a financial advisor and an attorney because the rules are strict.

Frequently Asked Questions

What is a charitable remainder trust?
A charitable remainder trust (CRT) is an irrevocable trust that pays income to you or another beneficiary for a set term or for life, and then gives whatever remains to a charity you name. In exchange, you get a partial income-tax deduction up front for the charity’s future share, and the trust can sell appreciated assets without paying capital gains tax, which frees up more money to produce your income.
What are the tax benefits of a charitable remainder trust?
Three main ones. You receive an immediate partial charitable income-tax deduction based on the value the charity is expected to receive. The trust is tax-exempt when it sells appreciated assets, so no capital gains tax is due at the sale, and the full proceeds stay invested. And the assets leave your taxable estate. In return, you give up the ability to change your mind, since the trust is irrevocable.
What is the difference between a CRAT and a CRUT?
They differ in how they pay you. A charitable remainder annuity trust (CRAT) pays a fixed dollar amount every year, set when the trust is created, so your income does not change. A charitable remainder unitrust (CRUT) pays a fixed percentage of the trust’s value each year, recalculated annually, so your income rises and falls with the investments and you can usually add assets later. A CRAT gives predictability; a CRUT gives a chance to grow with the portfolio.
Is a charitable remainder trust better than a donor-advised fund?
They do different jobs. A donor-advised fund is simple and low-cost and lets you recommend grants over time, but it does not pay you income. A charitable remainder trust is more complex and costly to set up, but it pays you an income stream and can spread capital gains, which suits someone sitting on a highly appreciated asset who also wants cash flow. A charitable lead trust is the mirror image, paying the charity first and your heirs later.

Information current as of July 16, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in your state can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.