Charitable Remainder Trusts

Charitable Remainder Trusts for Your Legacy

What if you could support the causes you care about and receive steady income for a term of years life at the same time? With a charitable remainder trust (CRT), that becomes a possibility.

At Lappin Estate Planning, we help individuals like you turn charitable giving into a smart financial strategy as part of their estate plan. Whether you want to reduce taxes, secure an income stream, or ensure a meaningful donation to a nonprofit, charitable remainder trusts can do it all.

We help clients understand the intricacies of charitable remainder trusts and develop personalized trusts that fit their unique goals and circumstances.

Ready to start working on your own CRT or have questions about this charitable trust? Call us at 561.778.8590 or submit a contact us form to schedule a consultation.

Understanding Charitable Remainder Trusts

A charitable remainder trust (CRT) allows you to benefit charity while still receiving income for life or for a set number of years, depending on your preference. It’s like having the best of both worlds: financial security for yourself and a gift for a cause you care about.

To create a CRT, you need to place assets into the trust, and in return, the trust pays you income over time. When the trust term ends, whatever remains goes to the charity you selected. Along the way, you get tax benefits, which means more money in your pocket while you give back.

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Types of Charitable Remainder Trusts

A prenuptial agreement isn’t just for the rich and famous. It’s for any couple who wants to start their marriage with honesty, security, and a clear There are two main types of CRTs: charitable remainder annuity trusts (CRATs) and charitable remainder unitrusts (CRUTs). The right one for you depends on your financial goals, income needs, and how you want your assets to grow over time.

So, what’s the difference?

1. Charitable Remainder Annuity Trust (CRAT)

A CRAT pays you (or your chosen beneficiary) a fixed dollar amount every year. The amount is based on the total value of the trust when it’s first created. No matter what happens to the trust’s assets over time, your payout stays the same.

Best for: People who want steady, predictable income.
Key benefit: Security—your payment never changes.
Potential downside: No flexibility. You can’t add more assets later, and payments won’t increase.

Think of a CRAT like a stable paycheck from your trust. You know exactly what you are getting each year, no surprises.

2. Charitable Remainder Unitrust (CRUT)

Most Charitable Remainder Trusts are CRUTs. A CRUT works a little differently. Instead of a fixed amount, you receive a percentage of the trust’s value each year. The trust is re-evaluated annually, so if it grows, your payments increase too. If it shrinks, your payments decrease.

Best for: Those who want growth potential and are comfortable with some fluctuation.
Key benefit: Projected income payments can rise over time if the trust performs well.
Potential downside: Your income isn’t guaranteed to stay the same, as it depends on investment performance.

A CRUT is more like owning a rental property. If the market goes up, you earn more, but there’s some risk involved.

Benefits of Charitable Remainder Trusts

A CRT is one of the most powerful estate planning tools available because it offers immediate benefits for you and future benefits for a charity of your choice. But how can it benefit you, exactly?

Steady income for life (or a set period): With a CRT, you or your chosen beneficiaries get regular payments—either a fixed amount (CRAT) or a percentage of the trust’s value (CRUT). Whether you need income for retirement or to provide for a loved one, a CRT delivers.
Huge tax savings: Let’s talk taxes—because no one likes paying more than they have to. A CRT can help you reduce capital gains tax when selling appreciated assets like stocks or real estate and claim a charitable tax deduction in the year you fund the trust. An ideal year to fund a CRT is a year with a major tax event (such as a year when you convert a traditional IRA to a ROTH IRA)
Sell trust assets without immediate tax consequences: A CRT allows you to transfer assets tax-free into the trust, where they can be sold without triggering capital gains tax. This means you keep more of your money working for you.
Create a meaningful legacy: Your CRT doesn’t just benefit you. This trust ensures your charitable giving continues after you’re gone. Whether it’s supporting medical research, education, or a local nonprofit, your gift can make an impact for generations.
Flexible planning: A CRT can be tailored to fit your financial goals. You can choose how long the trust lasts, pick one or more charities to receive the remainder, and name loved ones as beneficiaries before the charity receives the final gift.

The key is customizing the trust to fit your goals. At Lappin Estate Planning, we help you structure a CRT that maximizes your benefits while ensuring your charitable impact lasts for generations.

Eligible Assets for Charitable Remainder Trusts

Not all assets are created equal when it comes to charitable remainder trusts. Some work better than others, and choosing the right ones can maximize your tax benefits and long-term income.

So, what can you use to fund a CRT?

1. Appreciated Stocks and Investments

Have stocks, bonds, or mutual funds that have grown in value? Selling them outright could mean a huge capital gains tax hit. But if you donate them to a CRT, they can be sold tax-free, and you will receive income from the proceeds.

2. Real Estate

Own a rental property, commercial building, or land that’s skyrocketed in value? A CRT lets you sell it without capital gains tax and turn it into an income stream. Just one rule: the property can’t have a mortgage. Otherwise, it could create tax complications.

3. Cash

Yes, you can fund a CRT with cash, but you might be missing out on bigger benefits. Cash won’t generate the same capital gains tax savings as appreciated assets. If you have highly appreciated investments or property, those are usually the better choice.

4. Business Interests (With Careful Planning)

If you own a privately held business or shares in a partnership, you might be able to donate part of your interest to a CRT. This can be a smart exit strategy if you are looking to sell a business while reducing taxes. However, not all business structures qualify, so consult with a lawyer first.

5. Cryptocurrency

Have Bitcoin, Ethereum, or other digital assets that have soared in value? A CRT can help you convert crypto into stable income while avoiding capital gains tax. Since crypto is still a developing area in estate planning law, expert planning is a must.

6. Valuable Collectibles and Artwork

Rare art, vintage cars, or other collectibles might qualify, but the IRS has strict rules. Unlike stocks or real estate, collectibles don’t always provide the same tax benefits in a CRT. If you are considering this option, work with an experienced estate planning attorney to ensure it’s a smart move.

Creating and Managing a Charitable Remainder Trust

ASetting up a CRT involves the following steps:

Choose your beneficiaries: You, your spouse, or loved ones can receive income before the remainder goes to charity.
Pick the right CRT type: CRAT offers fixed payments and predictable income, while CRUT means payments will adjust based on trust value.
Fund the trust: Best assets include stocks, real estate, cash, or business shares to maximize tax benefits.
Set your payout terms: Decide how much you will receive, for how long, and ensure compliance with IRS rules.
Select a trustee: A professional or corporate trustee will manage investments, payments, and tax reporting.

Once everything is set up, managing your CRT will involve monitoring investments and payouts, ensuring tax compliance and reporting each year, as well as reviewing and updating charity choices as needed.

At Lappin Estate Planning, we can help you take care of all the steps of setting up a CRT. We will advise you of your options and explain how you can make your charitable trust a powerful tool as part of a broader estate plan. Call at 561.778.8590 or contact us online via our website to receive a consultation.

Frequently Asked Questions About Charitable Remainder Trusts

A CRT allows you to donate assets, receive income for life or a set period, and leave the remainder to a charity while enjoying tax benefits.

Anyone with appreciated assets, such as stocks or real estate, can set up a CRT to reduce taxes, generate income, and benefit a charity.

A CRUT pays a percentage of the trust’s value (which can grow), while a CRAT pays a fixed amount each year, regardless of performance.

Yes! You can designate one or more charities to receive the remainder of the trust when the term ends.

The remaining assets go directly to the designated charity, supporting its mission while avoiding estate taxes.

Yes. You receive an immediate charitable deduction based on the projected remainder that will go to charity.

Yes, you (or your chosen beneficiaries) can receive income for life or for a set number of years before the assets transfer to charity.

In most cases, yes. Many charitable remainder trusts allow you to update your charity selection if your philanthropic goals change.

A CRT offers income and tax savings. Unlike direct donations or donor-advised funds, you still receive a financial benefit from a. CRT.

Avoid funding a CRT with debt-encumbered assets, choosing the wrong trust type, or failing to properly structure payouts to meet IRS requirements.

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Your future needs a plan—one that makes the most sense for your unique situation. At Lappin Estate Planning, we’re here to guide you through every step, from wills and trusts to asset protection and probate matters. Let’s build a strategy that fits your needs. Contact us today to start planning.