Planning a Gift That Gives Back

How Charitable Remainder Trusts and Charitable Gift Annuities Work for You

Charitable Remainder Trusts (CRUT)

A Charitable Remainder Trust is a legal arrangement in which you transfer stocks, cash, or other assets into an irrevocable trust. When the trust is established, you receive a one-time charitable tax deduction based on the total value of what you transferred to the trust and the cost-basis if funded with an appreciated asset.

Once the trust is in place, an income rate is set. Each quarter, payments are made to you and/or other individuals you have named, calculated as a percentage of the trust’s current value. Because the percentage stays the same but the trust’s value can change over time, the actual dollar amount of each payment may go up or down. When the trust eventually ends, whatever remains is donated to the charity or charitable purpose you have chosen.

Charitable Gift Annuity (CGA)

A Charitable Gift Annuity works in a similar way: you transfer stocks, cash, or other assets to fund the arrangement, and you immediately qualify for tax benefits as a result. If you fund it with appreciated assets, the CGA can help minimize capital gains tax. A portion of these payments will be tax-free for a number of years and the percentage varies depending on the amount that would be subject to the capital gains tax. In general, the minimum payout rate is 5%, with the exact payout varying due to donor age, tax bracket, and the current federal rate.

The key difference between a CGA and a CRUT is that your payment is a fixed dollar amount, set at the time the CGA is established. That amount does not change, regardless of market conditions. Payments are made quarterly to you and/or one other named individual. When the CGA ends, the remaining funds are donated to the charitable purpose you have selected.

Which is right for you?

Both instruments allow you to make a meaningful gift, receive income, and benefit from tax advantages. The main practical difference is how you prefer to receive that income. Under both instruments, the current limit to creating such a fund with your IRA is $55,000 per person. For a married couple, it may be funded at $110,000 but each half must come from that spouse’s own account in their name.

These payments are taxable and do count towards your qualified charitable distribution limit which is $111,000 in 2026. However, this may be used to satisfy all or part of your required minimum distributions.

---