Charitable Remainder Trust (CRT): The “Give It Away to Keep It” Strategy
Tax Tips / Philanthropic Planning
Charitable Remainder Trust (CRT): The “Give It Away to Keep It” Strategy
💡 Executive Summary
- Problem: Selling a highly appreciated asset (e.g., $5M stock with $0 cost basis) triggers a massive immediate tax bill.
- Solution: Transfer the asset to a CRT before the sale. The trust sells the asset tax-free.
- Result: You receive an income stream for life, an immediate income tax deduction, and support a cause you love.
⚠️ THE “10% REMAINDER” RULE
This is not a “fake” charity scheme. The IRS requires that the mathematical value of the charitable remainder must be at least 10% of the initial contribution. If you drain the trust too aggressively, it fails qualification.
This is not a “fake” charity scheme. The IRS requires that the mathematical value of the charitable remainder must be at least 10% of the initial contribution. If you drain the trust too aggressively, it fails qualification.
A CRT is the ultimate tool for “Asset Transformation.” It converts a low-yielding, high-tax asset (like raw land or growth stock) into a high-yielding, tax-efficient income stream, all while creating a philanthropic legacy.
🧐 Core Mechanics: CRUT vs. CRAT
CRUT (Unitrust): Pays a % of the trust’s value (income rises if trust grows). Good for inflation hedge.
CRAT (Annuity Trust): Pays a fixed dollar amount. Good for security and predictability.
CRUT (Unitrust): Pays a % of the trust’s value (income rises if trust grows). Good for inflation hedge.
CRAT (Annuity Trust): Pays a fixed dollar amount. Good for security and predictability.
Performance Simulation
Capital Preservation ($2M Sale, Zero Basis)
Personal Sale (Tax Hit)
~$600k Lost to Tax
$1.4M Investable
CRT Sale (Tax-Free)
100% Principal Kept
$2.0M Investable
The “Triple Win” Effect
| Benefit | Personal Sale | CRT Strategy |
|---|---|---|
| Upfront Tax | Immediate Capital Gains | $0 (Deferred) |
| Income Base | Reduced by Tax | Full Pre-Tax Value |
| Income Tax | None (on sale) | Immediate Deduction* |
“Philanthropy is not just about writing checks; it is about structuring assets. A CRT allows you to do good for the world while doing very well for your own retirement.
🔗 Related BMT Playbooks (Internal)
🛡️ Alternative: Opportunity Zones (If you want to keep the principal) 📉 Simple Version: Donor Advised Funds (DAF) Explained ✅ Inverse Strategy: CLAT (Give Income, Keep Asset)🏛️ Institutional Resources (External)
📜 Legal Text: IRC § 664 (Charitable Remainder Trusts) 🏛️ IRS Official: CRT Rules & Requirements ⚖️ Regulation: Valuation of Charitable Interest
BMT designs for tax reality, not theory.