Charitable Remainder Trust (CRT)

A charitable remainder trust, or CRT, is an irrevocable trust that provides payments to one or more non-charitable beneficiaries for a stated term or for life, then transfers what remains to charity. In the United States, it is a specialised tax-exempt trust structure governed by federal tax rules, with required limits on its payment design, duration, and charitable remainder.

The structure can combine philanthropy with income and diversification planning. A donor may contribute appreciated property, after which the trustee can sell and reinvest it without the trust recognising immediate capital gains tax in the same way an individual seller generally would. The non-charitable beneficiaries can still bear tax as payments are distributed under ordering rules. The result depends on the trust meeting statutory requirements and being administered correctly.

Why it matters for family offices

A CRT can be relevant when a family wants to support charity, reduce a concentrated holding, and retain a payment stream. It is not simply a tax-free sale. The donor gives up control of the contributed asset, the charitable remainder is irrevocably committed, and the trust must follow its governing instrument and applicable rules. The nature and timing of contributions and payments can affect deductions, tax character, liquidity, and the value ultimately reaching charity.

Family offices often coordinate the donor, trustee, investment manager, charity, accountant, and legal adviser. They also need records that distinguish principal, income, realised gains, expenses, and beneficiary payments. Because the mechanics are specific to the United States and fact-dependent, design and administration typically require qualified US tax and legal advice.

How it shows up in practice

Suppose a founder holds shares with a low tax basis and wants to diversify while funding a long-term charitable goal. Before a binding sale, the founder transfers part of the holding to a properly established CRT. The independent trustee sells the shares, reinvests the proceeds in a diversified portfolio, and makes the defined payments to the founder. At the end of the stated term, the remaining trust assets pass to the named charity.

The family office tracks the trust separately from the founder's personal portfolio, supplies cash-flow and valuation data to the trustee, and records each payment with its reported tax character. It does not treat the full trust value as freely available family wealth because the remainder belongs to charity.