Charitable Remainder Trust Guide 2025: Save Taxes & Protect Assets with a CRUT

The Charitable Remainder Trust or CRT is a powerful tool for multiple reasons. Saving taxes, creating a stream of income, asset protection, and benefiting a charity, just to name a few.

There are a variety of ways that you can design a Charitable Remainder Trust and get creative. Historically, CRTs were used for highly appreciated real estate transactions where the seller potentially faced a hefty tax. However, with the rapid increase in the value of certain cryptocurrencies, traders have discovered the benefits of the CRT, along with the ability to avoid the initial tax on highly appreciated tokens or coins.

Why Cryptocurrency Investors Should Care

The root of the problem is that the tax crypto investors will pay when selling OR even trading their crypto is more than they realize. In fact, there are multiple taxes that could play into the equation in any one given transaction.

If you're lucky, you will first get to apply the Federal Long-Term Capital Gains rates. This is a maximum rate of 20% IF you held the token or coin being sold for at least 1 year or longer. However, when the gain is over a certain threshold, you must also pay the ACA Net-Investment Income Tax (ObamaCare) of 3.8%.

Next, you have to worry about the state tax on your gain. Wherever you are a state resident, you will pay at least that state's tax rate on the gain.

Finally, heaven forbid you are selling a token or coin you have held for less than 12 months. This means you have a Short-Term Capital Gain and pay Ordinary Income Tax Rates!! These rates are as high as 37%.

Example: An investor owns tokens or coins valued at $1M with an initial investment of $50,000. The gain would be $950,000 if the investor was to sell the tokens in their own name and potentially face a capital gains tax rate as high as 36.8%. This could result in a tax bill of $349,000!!

Avoiding the Initial Tax on the Sale

With a CRT, the basic concept is that a 'charity' (the Charitable Remainder Trust), is selling the cryptocurrency - Not You! Thus, there isn't any tax due on the initial sale.

This is because the ultimate beneficiary of the CRT assets is a qualified 501c3 charity. As such, the CRT can sell the crypto 'tax-free'!

Now "tax-free" may sound a little too good to be true. It's correct that there will be 'some' tax paid in the future. The real beauty of this is that the Donor doesn't pay tax on the initial sale of the cryptocurrency, thereby creating a larger 'pool' of money the Donor/Trustee can invest within the CRT.

What's Unique about a Charitable Remainder Unitrust?

A CRUT is a version of the broader CRT strategy. It is still an irrevocable trust that allows the holder of highly appreciated assets to donate them to the Trust creating a tax deduction and avoiding the tax on the sale of the asset or assets. It also creates the process for a 'revaluation' of the trust assets each year.

With a CRUT, the trust value is 'revalued' in January every year. Then makes payments to the Donor based on this value and the distribution percentage. When the value of the CRT increases, the actual dollar amount of the payments does as well.

Thus, the Donor is not only encouraged to invest the CRUT assets wisely in order to grow the 'bucket or pot' of assets in the CRT, but they are allowed to be actively involved in and decide on the investment decisions inside the CRUT.

What are the Benefits of a CRUT?

A properly implemented CRUT will result in the following six (6) benefits:

1. 'Tax-free' sale of the Crypto, thereby creating a larger 'pool' of money the Donor/Trustee can invest within the CRUT.
2. The Donor can invest the proceeds of the sale inside the CRT tax-free for the life of the Trust.
3. The donor receives a quarterly distribution based on the annual value of the CRUT at a fixed distribution percentage (between 5% and 15%).
4. The donor receives a current income tax deduction for the charitable contribution based on the present value of the future donation to the charity (typically around 10% of the FMV of the donated crypto).
5. Asset Protection for the trust assets from the Donor's personal actions.
6. The Charity gets the remainder when the donor dies.

Do I really pay NO Taxes whatsoever with a CRUT?

No. You still pay taxes on your distribution amount. The Donor will indeed pay tax on the quarterly distributions from the CRUT. However, the CRUT didn't pay any taxes while building the bucket of investments to its annual value, and the Donor doesn't always pay ordinary income tax rates on every dollar. It depends on the type of income generated inside the CRUT.

What Are the Basic Steps Involved in Creating a Charitable Remainder Trust?

1. Create the trust, designate the charity, and define the terms of the trust.
2. Donate/transfer property to the trust. You need this to take place before the property is under contract.
3. The trustee sells the property to a third party tax-free. All proceeds go into a trust account.
4. The donor takes a tax deduction over the next five years.
5. The trust pays income to the donor for life.
6. The donor may fund life insurance. The income paid to the donor can then fund a separate irrevocable life insurance trust.

Certified as a Tax Advisor By: Mark Kohler

Mark J. Kohler, senior partner at KKOS Lawyers and co-founder of Directed IRA, has over 25 years of experience helping entrepreneurs achieve financial freedom. Through YouTube, books, and live trainings, he breaks down complex strategies into simple, actionable steps. His Main Street Certified Tax Advisor Program now equips CPAs and agents to share these insights with clients.

Disclaimer:

The content provided on this blog is for educational and informational purposes only. It is not intended as legal, tax, or financial advice, and should not be relied upon as such. Laws and regulations vary by jurisdiction and may change over time. Readers are strongly encouraged to consult with a qualified professional—such as a licensed attorney, accountant, or tax advisor—for advice tailored to their specific situation.