Imran Razvi
Founder, Retire Well Financial Group
Imagine you own $500,000 of Apple stock that you bought for $25,000 thirty years ago. You need income in retirement. But if you sell, you owe capital gains tax on $475,000 of gain — roughly $113,000 gone to the IRS before you invest a single dollar.
A Charitable Remainder Unitrust — a CRUT — solves this problem elegantly. You transfer the stock into the trust. The trust sells it tax-free. The full $500,000 goes to work generating income for you. You receive an immediate charitable deduction. And when the trust term ends, whatever remains passes to the charity of your choice.
It is one of the most powerful — and most underused — tools in the estate and retirement planning toolkit. Here is how it works, who it is right for, and exactly what the numbers look like for your situation.
0%
Capital gains tax inside the trust
The trust is tax-exempt — it sells at full value
5–10%
IRS-required annual payout range
Minimum 5%, maximum 10% of current value
10%
Minimum remainder to charity
IRS requires at least 10% of initial value
How a CRUT works: four steps
A CRUT is an irrevocable trust established under IRC Section 664. Once funded, the mechanics are straightforward — but the tax benefits are substantial.
You transfer appreciated assets into the trust
You irrevocably transfer assets — typically highly appreciated stock, real estate, or a business interest — into the CRUT. Because the trust is a tax-exempt entity, it can sell those assets without triggering capital gains tax. The full pre-tax value stays in the trust and goes to work for you.
The trust pays you income for life or a fixed term
Each year, the trust pays you (and/or a named beneficiary) a fixed percentage of the trust's current fair market value — typically 5–8%. Because it is a unitrust, the payment fluctuates with the portfolio value: it rises in good years and falls in bad ones. Payments continue for your lifetime or a fixed term of up to 20 years.
You receive an immediate charitable tax deduction
In the year you fund the trust, you receive a charitable income tax deduction equal to the present value of the remainder interest that will eventually pass to charity. This is calculated using IRS actuarial tables and the Section 7520 rate. The deduction can be used immediately and carried forward for up to 5 years.
At the end of the term, the remainder passes to charity
When the trust term ends — either at your death, your spouse's death, or the end of a fixed term — whatever remains in the trust passes to the charitable beneficiary you named. This can be a donor-advised fund, a university, a hospital, your church, or any qualified 501(c)(3) organization.
"A CRUT lets you do three things at once: eliminate a capital gains tax bill, create a reliable income stream, and make a meaningful charitable gift — all from the same asset."
— Imran Razvi
CRUT vs. selling directly: the comparison
Who is a CRUT right for?
A CRUT is not for everyone. It is an irrevocable trust — once funded, you cannot take the assets back. It works best for people who have all five of these characteristics:
Highly appreciated stock
Low-basis shares with large embedded capital gain — selling directly would lose 23.8% immediately
Investment real estate
Property held long-term with significant appreciation and depreciation recapture exposure
Business owners pre-sale
Funding a CRUT before a business sale can eliminate capital gains on the transferred portion
Concentrated positions
Diversifying a single-stock position without triggering a taxable event
Charitably inclined retirees
Those who want income now and a meaningful charitable legacy at death
Important considerations before funding a CRUT
It is irrevocable
Once you transfer assets into a CRUT, you cannot take them back. The assets are permanently committed to the trust — and ultimately to charity. This is not a strategy for assets you may need to access.
The income is partially taxable
CRUT distributions are taxed in a specific four-tier order: ordinary income first, then capital gains, then tax-exempt income, then return of principal. The trust does not eliminate income tax on distributions — it eliminates capital gains tax on the sale inside the trust.
Minimum 10% remainder requirement
The IRS requires that the present value of the charitable remainder be at least 10% of the initial contribution. High payout rates, short terms, or older donors can cause a CRUT to fail this test. Your advisor will run this calculation before funding.
A wealth replacement trust can restore the inheritance
Some families use a portion of the income tax savings to fund an irrevocable life insurance trust (ILIT) — using the tax savings to purchase a life insurance policy that replaces the asset for heirs. This way, the family gets the income, the charity gets the remainder, and the heirs receive a tax-free death benefit.
Donor-advised funds make excellent charitable beneficiaries
You do not need to name a specific charity at the time you fund the CRUT. A donor-advised fund (DAF) can be the remainder beneficiary, giving you flexibility to direct the charitable dollars to specific causes over time — even after the trust term ends.
Calculate your CRUT benefits
Enter your asset details below to see an estimate of your charitable deduction, capital gains tax avoided, annual income stream, and the amount your chosen charity would receive. Adjust the sliders to explore different scenarios.
CRUT Benefit Calculator
Illustrative estimates — not tax advice. Consult a qualified advisor.
Published monthly by IRS. Higher rate = larger deduction.
Charitable Tax Deduction
$153,239
30.6% of asset value
Deductible in year of contribution (carry forward 5 yrs)
Income Tax Savings
$56,698
At 37% marginal rate
Estimated federal income tax saved from deduction
Capital Gains Tax Avoided
$107,100
On $450,000 gain
20% LTCG + 3.8% NIIT — eliminated by trust sale
First-Year Income
$30,000
6% of $500,000
$2,500/month in Year 1
Total Income Over 20 Years
$660,570
Cumulative payout stream
Fluctuates with portfolio value each year
Charity Receives at Term End
$610,095
After 20-year term
Remainder passes to your named charitable beneficiary
Total Estimated Benefit
$824,368
Tax savings ($163,798) + income stream ($660,570) over 20 years — plus $610,095 to your chosen charity.
This calculator provides illustrative estimates for educational purposes only. Actual charitable deductions are calculated using IRS actuarial tables (Publication 1458) and the applicable Section 7520 rate for the month of contribution. Tax savings depend on your individual tax situation. Consult a qualified estate planning attorney and tax advisor before establishing a CRUT.
"The families who use CRUTs well are not just being generous — they are being strategic. They are turning a tax problem into an income stream and a legacy, all at once."
— Imran Razvi
Giving, income, and legacy — from a single asset
A Charitable Remainder Unitrust is not a niche strategy for the ultra-wealthy. Any family with a significantly appreciated asset — a stock position, a rental property, a business interest — and a genuine desire to support a cause they care about should at least understand what a CRUT can do for them.
The tax code rewards charitable intent generously. A CRUT is one of the clearest examples: the IRS essentially subsidizes your income stream and your charitable gift by eliminating the capital gains tax that would otherwise have gone to Washington.
It is well with my soul — and for many families, a CRUT is one of the most meaningful expressions of that peace: providing for themselves in retirement while ensuring that something they built leaves a lasting mark on the world.
Imran Razvi
Founder & Lead Advisor, Retire Well Financial Group
Imran works with Maryland families to integrate charitable giving strategies — including CRUTs, donor-advised funds, and qualified charitable distributions — into comprehensive retirement and estate plans. His goal: help clients be as generous as they want to be, as tax-efficiently as possible.