by the Charitable Strategies Group

Donors should work with a qualified estate planning attorney and tax advisor to confirm that a charitable remainder trust ("CRT") will provide the expected results, with respect to both the income tax consequences of the gift as well as the administration of the CRT.

Schwab Charitable^TM does not act as trust or custodian for charitable remainder trusts. Donors should consult their legal or tax advisor about their particular circumstances.

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A Charitable Remainder Trust (CRT) is an irrevocable trust from which the donor (or other named income beneficiary/ies) receives an income stream for life or a term or years, and afterwards, a named charity receives the remaining trust assets. The donor can fund a CRT with a gift of cash or other assets, for which they are eligible to receive an immediate income tax deduction.*

• Convert appreciated assets into a lifetime income stream for you or a loved one. CRTs can be set up to provide an immediate income stream to the donor and a spouse for their lifetimes. Income payments can also be deferred to a set date or event to provide additional income during retirement or to support a child after a parent’s passing
• Couple a CRT with a donor-advised fund. A donor-advised fund may be the charitable beneficiary of a CRT. If a donor names a charity as a CRT remainder beneficiary and then later decides to change the named charity, the trust must be amended, resulting in additional legal fees. By naming a donor-advised fund account at a charitable organization as the CRT remainder beneficiary, the donor has the flexibility to recommend grants to multiple charities and can change the charitable beneficiaries at no additional cost. Using a donor-advised fund offers other benefits, such as the ability to advise how the charitable dollars are invested for potential growth that’s tax-free.
• Reduce your taxes with a charitable income tax deduction. If the CRT is funded with cash, the donor can use a charitable deduction of up to 60% of Adjusted Gross Income (AGI); if appreciated assets are used to fund the trust, up to 30% of their AGI may be deducted in the current tax year. In addition, if the donor cannot use the whole deduction in the year of the gift, the donor can carry over the deduction for up to five additional years.
• Defer capital gains tax. Charitable remainder trusts are particularly suited for funding with appreciated non-cash assets because any capital gains tax will be deferred until the time that income is distributed out to the income beneficiary. This type of contribution can help donors with concentrated positions in their investment portfolios to diversify their portfolios while spreading their capital gains tax burden out over time.
• Reduce or eliminate estate taxes. Because a CRT is irrevocable, assets contributed to a CRT may be removed from your estate for estate tax purposes.
• Consider potential gift tax consequences for others. A donor will usually create a CRT and designate themselves as an income beneficiary. However, the donor can name other non-spouse non-charitable beneficiaries to receive the income from the CRT. If they do, there may be a taxable gift to the non-spouse beneficiary when the CRT is funded. 
• Plan for all taxes on payouts. With a CRT, the donor must pay tax on the income stream, which is categorized into four tiers: (1) Ordinary income and qualified dividends; (2) capital gains (short-term, personal property, depreciation, long-term capital gain); (3) other tax-exempt income; and (4) return of principal. Only when a higher tier of income is exhausted does the next tier apply.