# Charitable remainder trusts: how they work, and when to set one up

*URL:* https://christianfinancialadvisors.com/resources/articles/charitable-remainder-trusts/
*Updated:* 2026-10-29T09:36:27+00:00

A charitable remainder trust is an irrevocable trust that pays you, or people you name, an income for life or a set term, then passes what remains to charity. It works best when it is set up before you sell an asset that has grown.

The tax code sets limits on how long the term can run and how much the trust can pay each year. Your attorney and CPA will confirm the limits that apply to your situation.

A client came to Christian Financial Advisors® after he sold a large business. I remember thinking, I wish we had got to him for [planning before he sold it](https://christianfinancialadvisors.com/podcast/tax-efficient-tithing-strategies/), because then we could have looked at a charitable remainder trust. By then, that door had closed.

I teach our [10-4-4 planned giving workshop](https://christianfinancialadvisors.com/podcast/creative-giving-strategies/) in churches and to pastors, and the charitable remainder trust is one of its four giving tools. Too often, people call me after the asset is already sold. The timing is the part most people miss, and it is where this decision is made.

## What a charitable remainder trust is

In the workshop, I walk people through four giving time periods. You can give now. You can give later. You can give an asset now but keep the income for your lifetime. Or you can keep the asset and give away the income. A charitable remainder trust belongs to the third one, alongside the charitable gift annuity. Those are the two tools I use when someone wants to give an asset and still receive income from it.

Here is how the trust works, in five short lines:

- The trust is irrevocable. Once you transfer the asset, you cannot take it back.
- It pays one or more people an income, either for life or for a set term.
- The payout is either a fixed dollar amount, which is an annuity trust, or a fixed percentage of the trust’s value each year, which is a unitrust. The tax code sets the range for each.
- The share that goes to charity must meet a minimum value when the trust is created. Your attorney will test it.
- What is left at the end goes to the charities you name.

An annuity trust pays the same dollar amount every year. A unitrust pays a percentage of the trust’s value, revalued each year, so the income can rise or fall. We cover the unitrust, often called a CRUT, on its own page, and we compare the two types side by side on another.

Setting up the trust may also give you an income tax deduction. How it is figured and what limits apply depend on your situation and the rules in effect for the year, so that is a question for your CPA.

### Remainder trust or lead trust

A lead trust runs the other way: the charity receives the income first, and the asset comes back to the family afterward. In my workshop I use a rental house as the example, where I give the house to a lead trust, the rent goes to charity for ten years, and then I take the house back. The two trusts are often confused, so I mention it here, but the lead trust has its own rules that I leave off this page.

## A worked example: the land, the sale and the income

When a client is about to sell a large piece of real estate, I like to [set up a charitable remainder trust first](https://christianfinancialadvisors.com/podcast/18-income-tax-strategies/). Here are two examples I use, told the way I tell them to clients.

**Land that has grown.** Picture land bought about ten years ago for a couple of hundred thousand dollars that is now worth over a million. Most of the sale price is gain. If you sell outright, the tax on that gain comes out of the proceeds, and what is left is what you can live on and give from. If you give the land to a charitable remainder trust first and the trust sells it, the sale is handled differently, which can leave more to invest for your income. The trust pays you from that larger amount, possibly for your lifetime, and then the remainder goes to charity.

**A property with almost no cost basis.** Take a property worth about $2 million that you have depreciated down to a basis of basically zero. If you sell it outright, you owe tax on a very large gain. If you put it in a charitable remainder trust before the sale, the trust sells it instead, and your income can be based on the full amount the property sold for, not on what is left after tax. You have given the property away, but you still receive income from it, and that is the heart of the idea.

Both examples are illustrations, not tax calculations. How much tax is saved, and when, depends on your situation and the rules in effect for the year. The income the trust pays is taxed to the person who receives it. Your CPA needs to run the numbers before anything is signed.

Land and other assets that pay little until they sell can call for a different payout design. We cover one of those, the NIMCRUT, on its own page.

## Where the remainder goes: a family giving fund

The remainder does not have to go to one charity. I like to see it go into a family giving fund, which is a donor advised fund. When the income has run its course, the remainder goes to charity, and your family ends up with an endowment in its own name. We cover [how donor advised funds work](https://christianfinancialadvisors.com/resources/articles/donor-advised-fund/) on their own page.

In some trusts, the income can be paid on the lives of your children as well as your own. That stretches the income across a second generation before the remainder goes to the fund. The rules for naming children, and whether any gift tax applies when someone other than you or your spouse receives the income, are for your attorney and CPA.

We help families form their own giving fund through the [National Christian Foundation](https://www.ncfgiving.com), the partner we use for donor advised funds and gift annuities, and we set that fund up as the remainder beneficiary of the trust.

I do this in my own family. My wife and I have a family giving fund of our own. When we both pass away, 20% of our estate goes to it, and my IRAs are part of that 20%. Our children think it is great, and I can watch their eyes light up when we talk about it.

## Before you sign anything: the timing rule

If you plan to sell a large piece of real estate, you need to talk to us before you even enter into a contract on it. We may advise a charitable remainder trust: put the property in the trust, and let the trust sell it. Not after, please.

The call we get too late sounds like this. A family tells us they have just sold a property for $3 million, and they want to know what we can do to lower the taxes. By then, there is not a lot we can do.

Exactly when it is too late is a question for your attorney. It depends on the facts of your sale, so ask before you list the property or sign anything.

As a general rule, [talk to an advisor before you sell](https://christianfinancialadvisors.com/podcast/life-events-requiring-financial-advice-and-planning-part-2/) anything worth more than about $100,000. That includes land, a large stock position, an investment property and a business. The same timing applies if you are selling a business, and we cover that on its own page.

We also make sure your own planning is done before any planned gift. My co-host Shawn Peters put it well: “how do you really know how much you can even afford to give until you know the other pieces?” So we take care of your financial planning, investment management, retirement planning and tax planning first, and then we do the planned gift.

### Is it right for you?

A charitable remainder trust tends to suit you if four things are true:

- You own a large asset with a small cost basis, such as land or a rental property bought long ago.
- You plan to sell it.
- You want income from the money after the sale.
- You truly intend to give.

We generally use these trusts for gifts above about $1,000,000.

If the asset is smaller, a simpler tool may do the job. A charitable gift annuity pays you an income for life in exchange for a gift, and the charity receives what is left. [Giving a portion of the asset before it sells](https://christianfinancialadvisors.com/podcast/charitable-giving-strategies-using-non-cash-assets/) sends that portion straight to charity or to a [donor advised fund](https://christianfinancialadvisors.com/resources/articles/donor-advised-fund/). We weigh the pros and cons of the trust on their own page.

## How it gets set up

A charitable remainder trust is not a do it yourself project. We build the plan and coordinate the team. An attorney drafts the trust, and we work with an attorney to put all of the legal documentation together. A CPA reviews the tax side. When it helps, we bring in other experts, including a planned giving specialist.

The steps run in this order:

1. Choose the type of trust and the payout.
2. Choose the trustee.
3. Name the income beneficiaries and the charities.
4. Sign the trust.
5. Transfer the asset to the trust.
6. Only then let the trust sell the asset.

The order matters. The trust has to own the asset before it is sold, which is why the timing rule above matters so much. We walk through the full process in our guide to setting up a trust.

## What the Bible says about giving an asset you have built

Psalm 24:1 says, “The earth and everything in it, the world and its inhabitants, belong to the LORD” (CSB). Where you believe your business belongs to the Lord, you can take a percent of it and give it away. I apply the same thinking to land or any other asset that has grown.

Here is how I see planned giving. Where the tax code allows, we take dollars that would normally go to tax and turn them into giving dollars, and you keep living on the same amount.

Acts 20:35 gives us the words of the Lord Jesus: “It is more blessed to give than to receive” (CSB). I picture a rock dropped into a pond. God gives and we receive. We give and others receive, and the ripple keeps moving outward.

## Decide before the sale, not after it

A charitable remainder trust is a decision you make before a sale, not after it. The right time to ask whether one fits is before the listing or the contract. Talk it through with Christian Financial Advisors® and with your own attorney and CPA, so the trust can be considered while it still can be. This page is general education and is not tax or legal advice.

[Talk to an Advisor](https://christianfinancialadvisors.com/services/planned-giving-services/)

## Frequently asked questions

### What is the difference between a charitable remainder annuity trust and a unitrust?

An annuity trust pays a fixed dollar amount each year. A unitrust pays a fixed percentage of the trust’s value, revalued each year. The tax code sets the rules and ranges for each, and we compare the two side by side on their own page.

### Can I change the charity after the trust is set up?

That depends on how the trust is written, so ask your attorney what your document allows. If the remainder goes to a flexible giving fund, the money still has to be given away, but your family can change which charities receive it later. A single-charity fund does not allow that.

### What happens to the trust if I die early?

If the trust pays you for your lifetime, it ends at your death and the remainder passes to charity sooner than it would have otherwise. If it also names a spouse or another person, the income continues for them as the trust provides.

### Can I put real estate with a mortgage into a charitable remainder trust?

Mortgaged property can be difficult or impossible to place in one, and some business shares may not be eligible either. How debt is treated depends on the facts, so ask your attorney and CPA early, before you list the property.

### How much does it cost to set up a charitable remainder trust?

The cost depends on the asset, the attorney who drafts the trust and the trustee you choose, and the trust has ongoing administration after it is set up. We walk through the likely costs with you and your attorney before you sign.

### Can I fund a charitable remainder trust from my IRA?

Retirement accounts are treated differently from land or stock, and the rules for using IRA money in a gift like this are narrow and change from time to time. Whether it is possible for you depends on your age, the type of account and the rules in effect for the year. Talk with your CPA, and with us, before you move any retirement money.

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