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charitable remainder trust

A charitable remainder trust (CRT) is an irrevocable trust that provides income to one or more beneficiaries for a specified period, after which the remaining assets are transferred to a qualified charitable organization . CRTs combine features of standard trusts and charitable trusts , allowing the grantor to provide income to beneficiaries while obtaining potential tax benefits for making a charitable contribution.

A valid charitable remainder trust must:

• Pay income to one or more living, non-charitable beneficiaries;
• Distribute income either for a term of up to 20 years or for the life of one or more individual beneficiaries;
• At the end of the income period, transfer at least 10% of the initial fair market value of the trust assets to a qualified U.S. charity.

There are two main types of charitable remainder trusts:

Charitable remainder annuity trust (CRAT) : Pays a fixed annual amount, which must be at least 5% and no more than 50% of the initial fair market value of the trust. Additional contributions are not permitted after the trust is established.

Charitable remainder unitrust (CRUT) : Pays a fixed percentage (minimum 5%) of the trust’s current fair market value, recalculated annually. Additional contributions can be made after the trust is created.

[Last reviewed in July of 2025 by the Wex Definitions Team
] 

Keywords

• trust

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