A retired Denver couple holds a rental property bought young and a block of stock from an employer long since acquired. Selling either means a painful capital gains bill; keeping them means concentrated risk and landlord headaches deep into retirement. They also give faithfully to their church and a scholarship fund. A charitable remainder trust is built for exactly this crossroads.
The mechanics are simpler than the name suggests. You transfer an appreciated asset into an irrevocable trust. The trust sells it — paying no capital gains tax at the sale, because the trust is tax-exempt — and reinvests the full proceeds. The trust then pays you (and your spouse, if you wish) income for life or a permitted term of years. Whatever remains at the end goes to the charities you've chosen. That's the 'remainder.'
Along the way you receive a partial income tax deduction in the funding year, sized to the value the charity is projected to receive. Whiteford's Colorado team designs these trusts as part of the firm's national trusts and estates platform — and helps you decide whether one actually fits, because a CRT is powerful but permanent.
How the pieces fit: income, deduction, and legacy
Three benefits arrive in sequence. First, tax-free diversification: because the trust pays no tax when it sells the contributed asset, the entire sale proceeds go to work generating your income — not the after-tax remnant you'd have outside the trust. Capital gains tax isn't erased for you personally; it's spread out, recognized gradually as distributions reach you under the tax ordering rules.
Second, the immediate deduction: funding a CRT produces a charitable income tax deduction for the present value of what charity is expected to receive, usable in the funding year with carryforward if it exceeds that year's limits. Third, the legacy: at the end of the term, the remaining assets pass to your chosen charities — entirely outside your probate estate and free of estate tax on the charitable share.
Annuity trust or unitrust: the one big design fork
Charitable remainder trusts come in two flavors. A charitable remainder annuity trust (CRAT) pays a fixed dollar amount every year, set at funding and never changing — predictable income, no inflation adjustment, no later additions. A charitable remainder unitrust (CRUT) pays a fixed percentage of the trust's value as recalculated each year — payments rise when the portfolio grows and fall when it doesn't, and you can add assets over time.
The tax rules bracket both designs: the payout rate must fall within prescribed floors and ceilings, and the charity's projected remainder must meet a minimum share of the initial value. Within those rails, design is personal: unitrust variations can even defer income until an illiquid asset is actually sold. The attorney will model the options against your income needs, the asset, and your age.
- CRAT: fixed payments, maximum predictability, no later additions
- CRUT: percentage-based payments that track portfolio value, additions allowed
- Flip and net-income variations suit trusts funded with hard-to-sell assets
- Payout terms can run for life, joint lives, or a permitted term of years
- Remainder can go to specific charities, a community foundation, or a donor-advised fund
Is a CRT right for you — and what to weigh before signing
The honest checklist: a CRT shines when you hold a highly appreciated asset you're ready to part with, want income rather than a lump sum, have genuine charitable intent, and can comfortably commit the principal — because the trust is irrevocable and the remainder truly goes to charity, not your children. Families who want heirs made whole often pair a CRT with life insurance owned outside the estate, replacing for the next generation what charity ultimately receives.
A CRT is also not the only door. Depending on your goals, a donor-advised fund, a charitable gift annuity through an institution you love, or simply gifting appreciated stock outright may achieve more with less structure — the attorney will tailor the strategy to your assets, ages, and intentions. A useful first step is the free Colorado Estate Snapshot at /estate-snapshot, which maps your assets and their appreciation so the conversation starts from facts.
