Most retirees believe charitable giving only benefits the charity. But what if it could also reduce your taxes, boost your retirement income, and protect your estate?
This isn’t wishful thinking—it’s a strategic move known as the Charitable Remainder Trust (CRT). When designed properly, CRTs can be a game-changer for high net worth individual tax planning, helping you align philanthropic goals with retirement income strategies while reducing capital gains and estate taxes.
What Exactly Is a Charitable Remainder Trust (CRT)?
A CRT is an irrevocable trust that allows you to convert highly appreciated assets (like real estate, stocks, or a business) into lifetime income. After your lifetime (or a term up to 20 years), the remainder goes to the charity of your choice.
There are two primary types:
| Type | Charitable Remainder Annuity Trust (CRAT) | Charitable Remainder Unitrust (CRUT) |
| Income Structure | Fixed annual payout | Variable payout based on trust value |
| Contribution Flexibility | No additional contributions allowed | Additional contributions allowed |
| Suitability | Predictable income needs | Growth-oriented portfolios |
Why Should You Consider CRTs in Retirement Planning?
You’re not just giving to charity—you’re solving a tax problem. Here’s how CRTs deliver real value in tax planning for high net worth individuals:
- Avoid Capital Gains Tax: Donate appreciated assets without triggering immediate capital gains.
- Receive a Charitable Income Tax Deduction: Based on the present value of the charitable remainder.
- Defer Taxation: Income from CRTs is taxed when distributed, often over decades.
- Remove Assets from Estate: Reducing potential estate tax liabilities for your heirs.
Did you know you can use CRTs in combination with Premium Financed Life Insurance to pass on wealth tax-free? More on that soon.
How Does a CRT Work, Step by Step?
- You contribute appreciated assets (like stocks or real estate) into the CRT.
- CRT sells the asset, tax-exempt.
- The trust invests the proceeds and pays you (or a named beneficiary) an income stream.
- Upon death or end of term, the remaining assets go to the named charity.
This allows you to transform illiquid or taxable assets into structured income—without taking a big tax hit upfront.
When Is the Right Time to Use a CRT?
- You’re approaching or already in retirement.
- You hold highly appreciated assets and want to diversify.
- You’re seeking tax-efficient ways to support charitable causes.
- You’re interested in legacy planning and estate tax minimization.
CRTs work especially well for business owners selling their company, individuals holding low-basis stocks, and retirees transitioning to income-generating assets.
There’s a way to replace the value gifted to charity for your heirs—tax-free. Let’s break that down.
Power Combo: CRT + Life Insurance Trust = Legacy Multiplier
Many tax planning certified professionals recommend pairing CRTs with Irrevocable Life Insurance Trusts (ILITs). Here’s how:
- Set up a CRT for income and tax deduction.
- Use the income to fund a life insurance policy inside an ILIT.
- When you pass, the death benefit flows tax-free to heirs, replacing (or exceeding) what went to charity.
This powerful strategy allows you to enjoy current income, reduce taxes, give back to causes you care about, and still leave behind a strong legacy.
5 FAQs – What Most People Ask
- Can I change the charitable beneficiary in a CRT? Yes, you may retain the right to change the charity, as long as the new beneficiary qualifies under IRS rules.
- What happens if I pass away before the CRT term ends? The remaining trust assets go to the designated charity, but you can add a secondary beneficiary if structured properly.
- Is the income from a CRT taxable? Yes, CRT income is taxable to the recipient—classified by the IRS’s “tier system” (e.g., ordinary income, capital gains).
- Can I use a CRT as part of my estate plan? Absolutely. CRTs reduce the taxable estate and can work in tandem with life insurance trusts and gifting strategies.
- How do I set one up without triggering IRS scrutiny? Work with a tax planning certified professional who understands the structure, documentation, and compliance rules for CRTs.
Real Tax Savings: A Strategic Outlook
CRTs are not just charitable tools—they’re multi-layered retirement and tax planning vehicles. Used correctly, they unlock:
- Long-term income
- Large charitable deductions
- Elimination of capital gains
- Significant estate tax mitigation
And here’s where Retire Well Dallas comes in—to design customized strategies for high net worth individual tax planning using advanced structures like CRTs, ILITs, and premium finance life insurance—giving you clarity, control, and confidence in your retirement vision.
Is a CRT Right for You?
Ask yourself:
- Do I want to reduce my income taxes?
- Am I holding appreciated assets I’m hesitant to sell due to tax exposure?
- Do I value giving back, but want to maintain income flexibility?
If yes—you’re a strong candidate for a CRT retirement strategy. With the right planning team and a smart structure, you can turn your giving into a strategic wealth tool.
Final Thought: Strategic Generosity Pays Off
Retirement isn’t just about income—it’s about impact. With CRTs, you don’t have to choose between supporting your family and supporting your causes. You can do both—efficiently, tax-smart, and with purpose. This isn’t just giving—it’s giving that gives back.
Let’s make your wealth work harder—for you, your legacy, and the causes you believe in.
Let me know if you’d like a tailored CRT strategy built into your retirement plan. Your future—and your legacy—deserve the most strategic approach available.