CRT is an irrevocable trust that pays you (or beneficiaries) income for life/term, then donates remainder to charity.

Two types: (1) CRAT (Charitable Remainder Annuity Trust) - fixed payment amount, (2) CRUT (Charitable Remainder Unitrust) - payment is % of annual trust value (5-50%, typically 5-8%).

Tax benefits: Immediate charitable deduction (present value of remainder using IRS Section 7520 rate, 5.4% in 2025), defer capital gains tax on appreciated assets, reduce estate tax.

Example: $1M stock (cost $200k, 5% CRUT) = $50k/year income + ~$400k deduction + avoid $160k capital gains tax.

CRAT = Fixed dollar payment (e.g., $50,000/year), simpler but trust can't accept new contributions.

Best for: Stable income needs, conservative investments, one-time large donation.

CRUT = Payment fluctuates with trust value (e.g., 5% × balance), allows additional contributions, inflation hedge.

Best for: Long-term growth, multiple contributions, wealth building + charity. 2025 example: $1M trust @ 5% - CRAT pays $50k annually (constant), CRUT pays $50k year 1, then grows/shrinks with trust (7% growth → $53.5k year 2).

If trust grows 7% annually, CRUT outpaces CRAT after ~10 years.

Deduction = Present value of charity's remainder interest using IRS Section 7520 rate (5.4% in Jan 2025).

Formula considers: asset value, payout rate, beneficiary age(s), and 7520 rate.

Tax treatment: (1) Immediate deduction when funding CRT (up to 30% AGI for appreciated assets, 60% for cash), (2) Carryforward unused deduction up to 5 years.

Example: $1M @ age 65, 5% payout, 5.4% 7520 rate = ~$400k deduction.

If AGI $500k, use $150k year 1 (30% limit), $150k year 2, $100k year 3.

Total tax savings @ 37% bracket = $148k federal + state savings.

CRT is tax-exempt entity - sells appreciated assets without triggering immediate capital gains.

You pay tax gradually as you receive distributions, using 4-tier system: (1) Ordinary income (highest tax), (2) Capital gains (20% + 3.8% NIIT), (3) Tax-free return of principal, (4) Tax-free (rare).

Example: $1M stock (cost $200k) in CRT: No capital gains tax on $800k gain when trust sells.

Receive $50k/year @ 5% - taxed as capital gains at 23.8% vs 23.8% upfront on full $800k.

Benefit: Deferral spreads tax over 20+ years + invests full $1M (not $840k after-tax).

IRS requires: 5% minimum, 50% maximum payout rate.

But practical optimal: 5-8% for tax efficiency.

Lower rate = Higher deduction (more goes to charity), higher rate = Less deduction. 10% actuarial test: Charity must receive ≥10% of initial asset value.

Example: Age 65, $1M asset: 5% payout = ~$400k deduction (40%), charity gets ~$600k. 8% payout = ~$280k deduction (28%), charity gets ~$520k.

Most choose 5-6% for balance: meaningful income ($50-60k on $1M) + maximum deduction.

Higher rates (>8%) mainly if older age (shorter payout period) or prioritizing income over deduction.

Yes! Joint-life CRT pays both spouses for lifetime of last survivor.

Impact: Lower deduction (longer payout period), but income security for surviving spouse.

Single life (age 65) = ~$400k deduction on $1M.

Joint life (both 65) = ~$320k deduction (20% less), but payments continue even if one spouse dies early.

Also options: (1) Term-certain CRT (e.g., 20 years, not lifetime), (2) Sequential beneficiaries (you first, then spouse, then charity), (3) "Flip CRUT" (starts as NIMCRUT, flips to standard CRUT at trigger event like sale of property).

Estate planning: CRT removes assets from estate, reducing estate tax for heirs if estate >$13.61M (2025).