Using Charitable Remainder Trusts (CRTs) to Reduce Taxes and Create Lifetime Income

All too often, individuals with highly appreciated assets—stock, real estate, or a business interest—struggle to find a tax-efficient way to unlock their value. Selling outright can trigger a significant capital gains tax bill, and that can feel like a frustrating tradeoff. 

But what if there was a way to convert those assets into income, reduce your tax burden, and make a lasting impact on the causes you care about? 

That’s where a Charitable Remainder Trust (CRT) comes in. 

At Plancorp, we help high-net-worth clients navigate these complexities, and a CRT is a go-to strategy in our tool belt under the right circumstances. But it’s not a one-size-fits-all solution—it requires thoughtful planning, modeling, and coordination with your advisory team.  

What Is a Charitable Remainder Trust (CRT)?  

A CRT is an irrevocable trust that allows you to convert highly appreciated assets into a stream of income for yourself or loved ones, while ultimately benefiting the charities that mean the most to you. It’s a “win-win” strategy that blends generosity with tax efficiency. 

How Charitable Remainder Trusts Work 

Here’s the general sequence of events:  

1. You transfer assets—such as stock, real estate, or private business interests—into the trust.  
2. The trust sells the assets without immediate capital gains tax.  
3. The proceeds are reinvested in thoughtfully diversified funds according to your risk tolerance. 
4. You (or the beneficiary) receive annual payments for life or for a term of up to 20 years.  
5. When the trust term ends, the remainder goes to one or more qualified charities.  

Depending on your goals, you can choose between two primary types of CRTs.  

Types of Charitable Remainder Trusts  

Charitable Remainder Annuity Trust (CRAT)

• Pays a fixed dollar amount annually (e.g., 5% of the initial value).  

• Once established, additional contributions cannot be made.  

• Ideal for investors seeking predictable, stable income. 

Charitable Remainder Unitrust (CRUT)

• Pays a fixed percentage of the trust’s value, recalculated annually.  

• Allows additional contributions over time.  

• More flexible, and payments may increase if investments grow.  

Both must follow IRS rules requiring that the charity’s remainder interest be at least 10% of the initial value—ensuring the charitable intent remains intact.  

Key Tax Advantages of a CRT  

CRTs are particularly powerful for individuals or families facing large capital gains, high income, or estate tax exposure. Here’s why:  

1. Avoid Immediate Capital Gains Tax

When you sell appreciated assets directly, you pay capital gains tax on the growth. By contributing those assets to a CRT, the trust sells them tax-free, meaning 100% of the proceeds can be reinvested to generate income.  

2. Receive a Charitable Income Tax Deduction

When the trust is funded, you get a partial deduction for the charitable remainder based on IRS calculations (actuarial factors like your age, income rate, and IRS discount rate).  

3. Reduce Estate Taxes

Because the assets transferred to the CRT are no longer part of your estate, they may reduce future estate tax liability. 

4. Defer Capital Gains Recognition

If you use appreciated assets to fund the CRT, you spread out capital gains recognition over time rather than taking a large gain in one year. 

5. Create an Income Stream for You or Loved Ones

The trust can provide lifetime or term-based income to one or more beneficiaries, often structured to align with retirement income goals.  

Example: Turning a Concentrated Stock Position into Lifetime Income  

Imagine you own $5 million of low-basis stock in a company that has appreciated significantly. Selling it outright would trigger capital gains taxes in the seven figures.  

Instead, you transfer the shares to a Charitable Remainder Unitrust. The trust sells the stock tax-free, reinvests the full $5 million, and begins paying you 5% annually—$250,000 per year.  

You also receive an upfront charitable deduction for the remainder interest, reduce your estate size, and ultimately leave a meaningful gift to your preferred charity.  

Why It Matters: The Bottom Line About CRTs 

A CRT isn’t just a tax strategy—it’s a way to align your wealth with your values. It helps you: 

• Keep more of what you’ve earned by deferring or avoiding capital gains tax. 

• Create reliable income for retirement or loved ones. 

• Reduce estate tax exposure and simplify your legacy planning. 

• Expand your impact on causes you care about. 

When a CRT Makes Sense  

CRTs aren’t just for the ultra-philanthropic. They’re ideal for individuals who want to blend tax efficiency, income planning, and legacy goals. A CRT may make sense if you:  

• Hold highly appreciated assets you want to sell tax-efficiently  

• Want to diversify a concentrated stock position  

• Seek reliable income in retirement  

• Want to make a substantial future charitable gift  

• Are looking to reduce future estate tax exposure  

Because they are irrevocable, CRTs require thoughtful coordination with your wealth manager, tax advisor, and estate attorney to ensure alignment with your broader plan.  

CRTs vs. Other Charitable Strategies  

Each has its place depending on your philanthropic intent and tax situation. Often, a CRT can complement other giving vehicles as part of a comprehensive philanthropic strategy.  

Integrating a CRT into Your Broader Financial Plan  

At Plancorp, we help clients explore charitable strategies not in isolation—but as part of a coordinated wealth plan that aligns with tax, investment, and estate priorities.  

A CRT can:  

• Serve as a retirement income bridge, particularly for those approaching a business sale or liquidity event.  

• Pair with tax-efficient investment management to grow trust assets sustainably.  

• Integrate into your legacy plan, ensuring your charitable vision carries forward.  

Bottom Line  

A Charitable Remainder Trust is one of the most sophisticated ways to reduce taxes, generate income, and make a lasting philanthropic impact. But it’s not a one-size-fits-all solution—it requires careful modeling, collaboration with your advisory team, and alignment with your broader goals.  

When designed thoughtfully, a CRT can help you keep more of what you’ve earned, provide for the people and causes you care about, and solidify your legacy as a steward of both wealth and purpose.  

If you’re considering whether a Charitable Remainder Trust fits into your financial plan, we invite you to book a private strategy session with a Plancorp wealth advisor. Our team can help you evaluate the tax impact, model your income needs, and see how a CRT could integrate into a comprehensive wealth strategy built around your goals.