The Tax-Free Pension: Charitable Remainder Trusts (CRT)
The Tax-Free Pension: Charitable Remainder Trusts (CRT)
How to sell a highly appreciated asset without paying a dime in capital gains tax, and convert that equity into a lifetime income stream for yourself.
Executive Summary
- The Dilemma: You own $5M in Apple stock or a commercial building bought for $500k decades ago. If you sell it to get retirement cash, you lose ~$1.5M to taxes immediately. You only have $3.5M left to generate income.
- The Solution (CRT): You donate the asset to a Charitable Remainder Trust. The Trust sells the asset. Since the trust is a tax-exempt entity, it pays $0 Capital Gains Tax. The full $5M is reinvested to generate income for you.
- The Payout: You receive an annual income (e.g., 5% to 50%) from the trust for the rest of your life. When you die, whatever is left (“The Remainder”) goes to charity. It turns a stagnant asset into a high-yield pension.
The NIMCRUT Variant
Advanced Strategy: If you don’t need income now but want it later (e.g., at age 70), use a “NIMCRUT.” It allows the trust to defer payouts until you retire, acting like an uncapped IRA. The money grows tax-free inside the trust until you turn on the income tap.
Mechanic: Converting Tax to Income
0% CapGain
Upon Sale
Income 1st
You Get Paid
Deduction
Upfront Tax Break
10% Rule
Min to Charity
Simulation: Selling $5M Zero-Basis Asset (Taxable Sale vs. CRT)
Lifetime Income Potential
| Feature | Charitable Lead Trust (CLAT) | Charitable Remainder Trust (CRT) |
|---|---|---|
| Primary Goal | Reduce Income Tax / Transfer to Heirs | Avoid Cap Gains / Income for Self |
| First Payee | Charity (Lead) | You (Beneficiary) |
| Final Payee | Your Heirs (Remainder) | Charity (Remainder) |
“A CRT allows you to do well by doing good. You disinherit the IRS, secure a higher income for yourself, and eventually leave a significant legacy to a cause you care about. The only loser is the Treasury.”
Essential Resources
INTERNAL
BMT Playbooks
EXTERNAL
Primary Sources