Legacy and Charitable Giving Guide

Charitable Remainder Trust: How a CRT Works, CRAT vs CRUT, and When It Fits a Colorado Giving Plan

A charitable remainder trust can bring together income, appreciated assets, and a lasting gift to the causes your family cares about. Think of it as a constellation: each star is placed with care, and the whole thing only makes sense when you see it together. This guide explains how a CRT works, how it compares with other giving tools, and where its trade-offs are.

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Plain Definition

What Is a Charitable Remainder Trust?

A charitable remainder trust (CRT) is an irrevocable trust that pays income to you or other named beneficiaries for life or for a term of up to 20 years. When that period ends, the remaining assets pass to one or more charities. The donor may get a partial income tax deduction in the year the trust is funded.

Because the trust itself is generally tax-exempt, it can often sell contributed assets without paying capital gains tax at the time of the sale. That gain doesn't disappear. Under IRS rules it is generally taxed to the income beneficiaries as they receive distributions. How it applies to you depends on your circumstances and should be confirmed with your CPA.

How a CRT Works, Step by Step

Draft and sign. An estate planning attorney drafts the trust and names the income beneficiaries, the payout terms, and the charitable remainder beneficiaries.

Fund the trust. You transfer cash or assets such as appreciated stock, real estate, or business interests. The transfer can't be undone.

Receive payments. The trust pays you, or the people you name, a fixed amount (CRAT) or a fixed percentage (CRUT) at least once a year.

Complete the gift. When the term ends, whatever remains goes to the charities you chose. That could be a public charity or, in some designs, the family's donor-advised fund.

Key IRS Rules

The Numbers That Shape Every CRT

According to the IRS, a CRT has to meet these requirements under Internal Revenue Code Section 664. Figures are current as of October 12, 2026.

20 yrs

Maximum fixed term (a CRT can also run for one or more lifetimes)

10%

Minimum value of the charitable remainder, measured at funding

5% to 50%

Required annual payout range for both CRATs and CRUTs

5.6%

IRS Section 7520 rate for October 2026, one input in the deduction calculation

Sources: IRS, Charitable Remainder Trusts; IRS, Instructions for Form 5227; IRS, Section 7520 Interest Rates; Revenue Ruling 2026-19. Accessed October 12, 2026. The Section 7520 rate is updated monthly.

Side-by-Side Comparison

CRAT vs CRUT vs Donor-Advised Fund vs QCD

These four tools often come up in the same conversation, but they do different jobs. A CRT is the only one of the four that pays income back to you. That feature is also why it costs more and takes more work to run.

Feature	CRAT	CRUT	Donor-Advised Fund	QCD
Income stream to donor	Fixed dollar amount every year	Fixed percentage of trust value, revalued each year, so payments go up or down	None	None; money goes directly from the IRA to charity
Deduction timing	Partial deduction in the funding year, based on the present value of the remainder	Partial deduction in the funding year, based on the present value of the remainder	Generally in the year you contribute, subject to AGI limits	No deduction; the distribution is left out of taxable income instead
Irrevocability	Irrevocable; no additional contributions allowed	Irrevocable; additional contributions generally allowed	Contributions are irrevocable gifts to the sponsor	Each distribution is a completed gift
Setup complexity	High: attorney-drafted, trustee, annual filing	High: attorney-drafted, annual valuation, annual filing	Low: open an account with a sponsor	Low: coordinate with the IRA custodian
Eligibility notes	Payout of 5% to 50%; remainder of at least 10%	Payout of 5% to 50%; remainder of at least 10%	Sponsor rules apply	Age 70½ or older; up to $108,000 for 2026

QCD figures come from IRS Publication 526. CRT rules come from the IRS CRT overview. Both accessed October 12, 2026. If you're weighing a simpler option, see our guide to donor-advised fund pros and cons, or explore our wider list of charitable giving strategies in Denver.

Choosing a Structure

CRAT vs CRUT: Which Payout Design Fits?

The main question is whether you value a steady payment or a payment that moves with the trust's value. Neither one is better in general. Each has trade-offs.

Charitable Remainder Annuity Trust

Pays the same dollar amount every year, which can make budgeting easier. The catch is that the payment doesn't adjust for inflation, and if trust assets fall, the payments can wear down the principal. Some families also find it limiting that you can't add assets later.

Charitable Remainder Unitrust

Pays a set percentage of the trust's value as revalued each year, so payments may rise or fall with the assets. That flexibility comes with less predictability. It also requires an annual valuation, which can cost more when the trust holds hard-to-value assets.

Unitrust Variations

Some unitrusts are drafted to pay only the trust's net income, or to "flip" to a standard payout after something happens, such as the sale of real estate. These versions can work for illiquid assets, but they add drafting complexity and should be designed by your attorney.

Common Planning Moments

Using a CRT After a Business Sale or With Low-Basis Assets

CRTs often come up when a family owns something that has grown a lot in value: a closely held business, a long-held stock position, or real estate. If you sell outright, the gain may be taxed all at once. If you contribute the asset to a CRT before the sale, the trust may be able to sell it and reinvest the full proceeds, while you receive payments over time.

Timing matters. If a sale is already legally binding when the asset goes into the trust, the IRS may treat the gain as yours anyway. Business owners exploring an exit may want to look at a CRT alongside their business succession planning well before a letter of intent is signed.

1 Business owners. A CRT may help spread out the tax recognition from selling business interests and create an income stream after you leave. Valuation, transfer restrictions, and the timing of the sale all need careful review.
2 Concentrated stock. Contributing low-basis shares may let the trust diversify without an immediate taxable sale. Distributions to you are still generally taxable under the IRS ordering rules.
3 Real estate. Colorado property held for decades may be a candidate. Mortgaged property, though, can create serious tax problems inside a CRT, so lenders and counsel should be involved early.
4 Multi-generational families. A CRT can name a family foundation or donor-advised fund as the remainder beneficiary, so the next generation can carry on the family's giving. Keep in mind that the assets going to charity won't pass to heirs.

A Balanced View

Drawbacks of a Charitable Remainder Trust

A CRT is a long-term commitment. Before you fund one, go through these limitations with your advisor, attorney, and CPA.

It's irrevocable. Once you fund the trust, you generally can't take the assets back or change the remainder gift to benefit family.

Setup and admin costs. Legal drafting, trustee fees, appraisals, and annual tax preparation make CRTs a poor fit for small gifts.

Strict payout rules. Payouts have to stay between 5% and 50%, and the remainder has to be worth at least 10%. Depending on ages and rates, some designs won't qualify.

Taxes are deferred, not eliminated. Distributions are generally taxable to you, and the deduction may be limited by AGI rules.

Less for heirs. The assets going to charity are taken out of the family's inheritance, which some families offset with other planning.

Investment and compliance risk. Trust assets can lose value, and mistakes in administration can put the trust's tax treatment at risk.

Our Role

When a CRT Fits a Colorado Giving Plan

A CRT tends to be worth discussing when three things are true: you want to give to charity, you hold appreciated assets, and you'd like income from those assets for years or for life. It is one star in a larger constellation that also includes your estate plan, your retirement income, and your family's values. See how it can connect to legacy planning in Denver and Colorado and to the 2026 federal estate tax exemption.

At The Stellarix Group, our CFP® professionals, including Ryan Griffin, CFP®, and Haley Gray, CFP®, AIF®, work with Tom Mueller, ChFC, to test whether a CRT makes sense within the household's overall plan. We don't draft trusts or give legal or tax advice. We work alongside your estate planning attorney and CPA so each decision is reviewed by the right professional. We serve families from our Denver office and clients in all 50 states.

Clarify Goals

We talk through your income needs, the causes you care about, and what you hope to leave to the next generation.

Compare Alternatives

We look at CRATs, CRUTs, donor-advised funds, QCDs, and direct gifts side by side, including their costs and limitations.

Coordinate Your Professionals

We share the planning analysis with your attorney, who drafts the trust, and your CPA, who reviews the deduction and the ongoing tax treatment.

Review Over Time

Once a trust is funded, we review it as part of your broader plan as tax rules and family circumstances change.

Frequently Asked Questions

Charitable Remainder Trust FAQs

What Are the Downsides of a Charitable Remainder Trust?

The main downsides are that a CRT is irrevocable, it costs money to set up and run, its payouts must follow strict rules, the assets going to charity won't pass to heirs, and distributions are generally still taxable. Because of the costs, it is usually considered only for larger gifts.

What Is the 10% Rule for Charitable Remainder Trusts?

The 10% rule says the projected value of the charity's remainder must be at least 10% of the assets' fair market value when they go into the trust, according to the IRS. Beneficiary ages, the payout rate, the term, and the Section 7520 rate all affect whether a design passes.

Do Charitable Remainder Trusts Avoid Capital Gains Tax?

Not entirely. A CRT generally defers capital gains rather than eliminating them. The trust can usually sell appreciated assets without immediate tax, but the gain is generally taxed to income beneficiaries as they receive distributions. If a sale is already binding before funding, the gain may be taxed to the donor.

How Long Can a Charitable Remainder Trust Last?

A CRT can last for the lifetime of one or more beneficiaries or for a fixed term of up to 20 years, according to IRS rules. When the term ends, the remaining assets go to the named charity or charities.

What Is the Difference Between a Charitable Trust and a Charitable Remainder Trust?

"Charitable trust" is a broad term, and a charitable remainder trust is one specific type. In a CRT, income goes to you or your beneficiaries first and charity receives what's left. A charitable lead trust works the other way around: charity receives payments first, and the remainder goes to family or other beneficiaries.

One Star to Guide the Way

Explore Whether a Charitable Remainder Trust Belongs in Your Plan

Our credentialed team, which includes CFP®, ChFC, CFA, and CLU professionals, can help you weigh a CRT against other giving tools. We'll do it in coordination with your attorney and CPA, with no pressure to act. Visit us at 2000 S Colorado Blvd, Tower 2, Ste 800, Denver, CO 80222, or call (303) 692-8183.