How Charitable Remainder Trusts Fit into an Estate Plan

Takeaways

• A charitable remainder trust (CRT) is an estate planning tool that allows you to donate to charity while receiving income for a set term, blending philanthropic goals with financial strategy.
• CRTs offer such benefits as tax deferral and income streams, but they are irrevocable and complex. The remaining assets ultimately go to charity rather than heirs. Recent legislative changes may also impact their suitability.

Would you be more inclined to give to charity if you could turn your assets into steady income, avoid an immediate tax bill, and leave a legacy for a worthy cause?

A charitable remainder trust (CRT) can do exactly that. This estate planning tool blends philanthropy with financial strategy, allowing you or your beneficiaries to receive income for a set term. The remaining assets eventually go to charity.

For the right individual, a CRT can check multiple boxes: funding retirement, reducing taxes, diversifying investments, and making a meaningful charitable gift — but it’s not for everyone. CRTs are irrevocable, complex to administer, and ultimately pass their remaining value to charity rather than to your loved ones.

Recent legislation makes this an especially good time to review how CRTs work, their pros and cons, and whether they might make sense in your estate plan.

Assessing Americans’ Giving Spirit in 2025

More Americans are aligning their spending and investments with their personal values, an approach often called “intentional” or “conscious” spending.

For example, 82 percent told Harris Poll that their values play a role in their financial decisions. Ad platform Givsly found that over 88 percent of U.S. consumers purchase from brands that embody their values, and that a quarter of Americans in 2025 consider a brand’s values more today than they did five years ago.

Despite positive signs about U.S. charitable giving tied to stock market gains, the long-term philanthropic trend in this country remains downward. The share of Americans who give to charity has fallen, in part due to declining trust in charities and partly due to waning economic confidence. When times are good, people tend to give more. When the economic outlook tightens, so do wallets.

But the connection between finances and philanthropy isn’t quite so simple. Americans clearly still want to put their money where their mouths — and their values — are. Two-thirds say they’re even willing to pay more for brands that reflect their values.

Americans’ giving spirit isn’t going away, but it is changing. For many, donations might just be a matter of finding the right mix of intentional spending and financial planning, a balance that a CRT can help achieve.

How a Charitable Remainder Trust Works

• A CRT is an irrevocable, “split-interest” trust. It benefits two different parties over time: you (or other noncharitable beneficiaries you designate) and a qualified charitable organization.
• You transfer assets, such as cash, real estate, or securities, into the CRT. Once transferred, these assets are legally owned by the trust and are no longer part of your personal estate.  
• The trust pays you (or other named beneficiaries) income for a specified term. The term can be up to 20 years or for the lifetime(s) of the income beneficiaries.
• Payments are either fixed annually or variable based on the trust’s structure.
• Remaining assets in the trust go to the charity (or charities) you named when setting up the trust, either at the end of the trust term or upon the death of the last noncharitable beneficiary.

The Benefits of a CRT

CRTs are tax-exempt, so they can sell appreciated assets without triggering immediate capital gains taxes. That means you can, say, convert a highly appreciated stock or investment property into an income stream while avoiding an upfront tax hit.

If you hold a large position in a single stock or asset, a CRT can also help you diversify your portfolio, because the trust can sell the concentrated asset and reinvest the proceeds across a broader range of investments. You may opt to serve as trustee, which gives you control over how the trust assets are invested.

In addition, you’ll be eligible for a partial charitable income tax deduction in the year you fund the CRT. The deduction amount depends on your age, the trust payout rate, current IRS discount rates, and other factors. And although the trust itself is irrevocable, you may be able to change the charitable beneficiary if your philanthropic priorities shift.

Since assets transferred to a CRT are no longer considered part of your personal estate, they can lead to a reduction in potential estate taxes as well.

To summarize, a CRT lets you convert appreciated assets into a steady income stream, reduce or defer taxes, and diversify your portfolio, and leave a meaningful charitable gift.

Potential Downsides of CRTs

While there’s plenty of upside, CRTs are not without potential drawbacks. When deciding whether a CRT is right for you, consider the following:

• A CRT is irrevocable. Once assets are transferred, you lose direct control over them. You cannot change your mind and take the assets back, nor can you easily alter the trust’s terms or beneficiaries (other than the charitable remainder beneficiary, in some cases).
• Setting up and maintaining a CRT involves legal and administrative complexities. This typically entails higher setup costs and ongoing administrative fees, making CRTs generally more suitable for substantial asset donations where the tax benefits outweigh these expenses.
• Assets go to charity, not heirs. The “remainder” of the trust ultimately goes to your chosen charity. If your primary goal is to leave the full value of specific trust assets to your family members, a CRT is not the appropriate vehicle.
• Income from a CRT is taxable. While the trust itself is tax-exempt, the income payments you receive from the CRT are taxable, with payments taxed according to a specific “tier” system.

Is a CRT Right for You?

With these pros and cons in mind, a CRT may be a good fit if you:

• Own highly appreciated assets, such as stocks, real estate, or a business interest, and want to sell without triggering a large capital gains tax bill.
• Need supplemental income for retirement, to support a spouse, or to provide for other loved ones during their lifetimes.
• Have strong charitable intent and want to leave a meaningful legacy for one or more nonprofits.
• Are in a higher tax bracket and can make the most of the income tax deduction available in the year the trust is funded.
• Can commit substantial resources, often $100,000 or more, to offset the legal and administrative costs involved.

CRTs and Recent Legislative Changes

Review your estate plan every few years or when there is a major change to your family circumstances or the law. Two laws from the past few years could affect the use of CRTs in your estate plan and the charitable legal landscape more generally:

• SECURE 2.0 Act created a new, one-time option to fund a CRT (or charitable gift annuity) with up to $54,000 in 2025 (indexed for inflation) directly from an individual retirement account (IRA) through a qualified charitable distribution (QCD). The CRT must meet specific payout and beneficiary rules, but this provision offers a way for IRA owners to blend retirement income with charitable giving.
• The One Big Beautiful Bill Act (OBBBA) didn’t change CRT rules directly, but it adjusts charitable deduction rules and estate tax exemptions. Starting in 2026, itemizing taxpayers can only deduct charitable contributions that exceed 0.5 percent of their adjusted gross income, and high earners face a 35 percent cap on the value of those deductions. These changes could reduce the immediate tax benefit of funding a CRT for some donors, though CRTs still offer capital gains tax deferral, income streams, and estate planning advantages.

Factors within your family, the law, and charities can all affect the suitability of a charitable remainder trust in your estate plans. Review your plan, including whether a CRT — or another type of trust — belongs in it.

Further Reading

• Charitable Remainder Trusts: Income for Life and a Good Deed at Death
• CRTs: “Test-Drive” Charitable Giving
• Will You Owe Gift Taxes This Year?