The term charitable remainder trust refers to an irrevocable trust that provides income to a beneficiary and assets to a charitable organization. Charitable remainder trusts are frequently funded with highly-appreciated assets.
Also referred to as a CRT, charitable remainder trusts are oftentimes established by a donor / grantor that has highly-appreciated assets. This irrevocable trust provides the beneficiary with a long-term source of income, while allowing the donor / grantor to also provide a significant monetary gift to a charitable organization.
The main features of a CRT include:
CRTs offer the donor / grantor several advantages, including:
Oftentimes the trustee will immediately sell the trust's assets, investing the proceeds into income-producing assets. Since the grantor no longer owns the assets, they avoid paying capital gains on their appreciated value. This mechanism provides a tax-efficient way for the donor to convert highly-appreciated, non-income producing assets into income-producing assets.