Charitable Remainder Trust (CRT)
You transfer appreciated assets to the trust, take an upfront partial income-tax deduction, receive an annuity or percentage income stream for life or a term of years, and at the end the remainder goes to charity.
A charitable remainder trust is a split-interest trust: you (or someone you name) receive an income stream from the trust for a period, and a qualified charity receives whatever is left at the end.
Two flavors by how the income is calculated:
- **CRAT — Charitable Remainder Annuity Trust**: pays a fixed dollar amount each year (at least 5% of the initial trust value). No new contributions allowed after formation.
- **CRUT — Charitable Remainder Unitrust**: pays a fixed percentage (at least 5%) of the trust's value recalculated each year. Can accept additional contributions.
Tax benefits: (1) income-tax deduction in the year of the gift equal to the present value of the remainder interest going to charity, (2) the trust itself is tax-exempt, so you can contribute highly appreciated stock or real estate and the trust can sell without paying capital gains tax, (3) assets in the are out of your taxable estate.
Use case: you have a highly appreciated concentrated stock position, you want income from it without triggering immediate capital gains, and you are charitably inclined.
Tagged 🔴 because IRC § 664 has specific funding, payout, and reporting requirements, and mistakes can disqualify the trust entirely.
State-specific notes
Governed entirely by federal tax law (IRC § 664). State trust law provides the vessel but the tax treatment is federal.
CRTs are governed by federal tax rules (IRC § 664) with Alabama administration under the Uniform Trust Code (Ala. Code § 19-3B-101 et seq.). Alabama conforms to federal treatment for the charitable income-tax deduction; there is no separate Alabama state estate-tax benefit because Alabama repealed its estate tax. Alabama's flat 5% top income-tax rate means federal-side benefits dominate.