Key Term

What is Charitable Remainder Trust?

Definition

A Charitable Remainder Trust (CRT) is a tax-exempt irrevocable trust designed to reduce taxable income by first dispersing income to the beneficiaries of the trust for a specified period, and then donating the remainder of the trust to the designated charity. The trust can be funded with cash, appreciated assets, or other property, and typically provides an income stream to the donor or other beneficiaries for life or a set term of years.

Significance

CRTs are significant tools in philanthropic planning as they offer multiple benefits to donors and charities. They allow donors to make substantial charitable gifts while retaining an income stream, potentially reducing capital gains taxes on appreciated assets, securing an immediate charitable tax deduction, and reducing estate tax liability. For charities, CRTs represent a reliable source of future funding, as the remaining trust assets are guaranteed to transfer to the charitable organization. This combination of personal financial planning and charitable intent makes CRTs particularly attractive to donors who wish to balance their philanthropic goals with their income needs.