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Charitable Remainder
Trusts (CRTs) Made Easier

The Simple Strategy to Defer Taxes on Highly Appreciated Assets

Chances are that you want to create generational wealth for your family in the years following your death. If you have high-value assets now, you might consider selling them to contribute the proceeds to an account for this purpose. However, you might be subject to high taxes on these sales that can eat into what the asset is truly worth.

What can you do to protect your assets and pass on as much value as possible to yourself or to the next generation?

A charitable remainder trust could be the solution that you have been searching for. All of your highly appreciated assets that are exposed to taxes can be designated into this type of trust. Learn more about CRTs here to help you decide if this financial move is the right choice for you.

Charitable Remainder Trusts could be right for you if you’re concerned about:

Capital gains<br/>taxes

Capital gains
taxes

Estate and<br/>gift taxes

Estate and
gift taxes

Depreciation<br/>recapture

Depreciation
recapture

IRA&#160;<br/>beneficiaries<br/>distributions<br/>

IRA 
beneficiaries
distributions

What is a Charitable Remainder Trust?

A Charitable Remainder Trust is a tax-exempt, irrevocable trust funded by donated assets. Payments continue for a specific term of up to several years or the life of one or more beneficiaries. After that period, the remaining trust assets pass to qualified charities you’ve selected or your family’s Donor Advised Fund (DAF).

What assets can you put into a Charitable Remainder Trust?

Any highly-appreciated asset with exposure to taxes and to which you have a clear title can be put into a Charitable Remainder Trust.

  • Antique/Vintage Cars
  • Stocks
  • Fine Art
  • Residential Real Estate
  • Coins & Stamps
  • Raw Land
  • Rare Instruments
  • Commercial Real Estate

How CRTs Created New Income Streams and Reduced Taxes

See the different outcomes of selling an asset outright versus establishing a Charitable Remainder Trust.

Vintage Car Case Study
Real Estate Case Study

Who can benefit from a Charitable Remainder Trust?

A couple or individual leaving large bequests to charity

A couple or parent who would like to leave a creditor-proof lifetime income stream to his or her children

Large estates facing estate, gift, and inheritance taxes that need to remove assets from the taxable estate

A family needing to diversify away from closely held stock, a highly-concentrated position in one stock, or large parcels of land

Owners of commercial property who have depreciated their property and/or have participated in a 1031 tax-free exchange

What’s the catch to a Charitable Remainder Trust?

There are two drawbacks to Charitable Remainder Trusts.

Irrevocability

Once assets have been transferred to the trust, you no longer have access to the entire principal. If your goal is to use the entire proceeds from the sale of your asset to buy a large ticket item like a yacht or horse farm, a Charitable Remainder Trust is probably not for you.

Initial Expenses & Ongoing Maintenance

The trust must be created by an attorney competent in irrevocable trusts, the assets need to be invested so there is liquidity and no violations of various rules, and annual tax forms must be filed. The annual maintenance costs (CPA, attorney, investment advisor) are paid by the trust itself after the initial trust creation.

 

Help to Protect your wealth with a Charitable Remainder Trust.

Download Your Charitable Remainder Trust Guide

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How to Set Up a Charitable Remainder Trust from Start to Finish

The logistics of setting up your Charitable Remainder Trust require the coordination of three disciplines -tax, legal, and financial - and professionals experienced with charitable trusts.

STEP

1
create

The first step is consulting an Estate Planning Attorney to draft the trust according to IRS guidelines. The legal team will define payout terms, duration, and apply for the trust’s tax-exempt Tax Identification Number (EIN).

 

STEP

2
Donate

The legal team facilitates the transfer of assets into the trust. This may require deeds, assignments, or other legal documentation. The donor signs off, and the trustee accepts the assets—often the same individual. Coordination with financial professionals may be needed, especially for securities and financial instruments.

STEP

3
Determine Tax
Deduction

The tax team calculates the donor’s tax deduction, based on the charitable remainder interest of the trust. To qualify, at least 10% of the initial assets must be designated for charity. The deduction can be spread over up to five years.

STEP

4
Sell

Assets contributed to the trust are liquidated. For stocks and liquid investments, this is straightforward. Real estate and unique assets typically have a buyer lined up. The trust cannot take on loans or mortgages, so assets must be sold outright.

STEP

5
Reinvest



Once liquidated, funds are reinvested into a diversified portfolio of 10-15 asset classes. Proper management ensures distributions retain favorable long-term capital gains tax treatment. Mismanagement could result in distributions being taxed as ordinary income, which may negatively impact beneficiaries.

STEP

6
Distribute Income


The trust begins distributing income to beneficiaries—usually on a quarterly basis but at least annually. The financial team ensures sufficient liquidity for payments while preserving the trust’s principal for future beneficiaries and charities.

STEP

7
Retain Tax Characterization

The tax and financial teams coordinate tax reporting. Most distributions qualify for long-term capital gains treatment. Though the trust itself owes no taxes, the tax team must prepare IRS filings and distribute K-1 forms to non-charitable beneficiaries.

STEP

8
Distribute to Charity or Donor Advised Fund

Once the trust term ends, remaining assets are distributed according to the donor’s wishes. Charities qualifying under section 501(c)(3) receive the funds as a lump sum. Alternatively, funds can be directed to a Donor Advised Fund (DAF), allowing ongoing investment and charitable giving over time, preserving the donor’s legacy.

Partner with the Charitable Remainder Trust Professionals

Navigating the setup for your charitable remainder trust requires the assistance of an experienced partner.

With our unique tri-disciplinary firm that seamlessly melds legal, tax, and financial expertise, Magellan Planning Group is a good choice to help you establish your Charitable Remainder Trust. As fiduciaries, we always operate in your best interest.

Give us a call to learn more about how we can help you set up your Charitable Remainder Trust today!

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