Most clients with CRTs don’t understand their full range of secondary planning options; they naturally assume that because their CRT is irrevocable, they’re stuck with it for life (or until the end of the trust term).

National Association of Estate Planners & Councils (NAEPC) Journal of Estate and Tax Planning, 2016

Charitable remainder trusts (CRTs) are valuable tax planning tools for clients, offering the ability to defer capital gains, while generating an up-front tax deduction and an income stream for life, or a set term.

But CRTs are also highly inflexible assets. They are “irrevocable” by law, meaning the key terms – payout rate, who the income beneficiaries are, etc. – cannot be changed.

Because CRTs are irrevocable and life circumstances change, CRTs tend to fall out of alignment with a client’s needs and goals over time.

Typically, a CRT is tied to a client’s lifetime and remains in place for several decades. At its inception, the CRT fits perfectly with the client’s goals and life circumstances, and in most cases, it remains a good fit for many years, even decades. But inevitable life changes, as well as shifting tax and/or economic environment, can lead to a situation where a client no longer benefits from the CRT they have in place. The CRT is no longer a good fit.

Considering this, it’s not surprising that the longer a CRT has been in place, the higher the likelihood that a client will want to make a change. Those who want or need cash, are concerned about rising tax rates, want to provide for their children or grandchildren or are looking to simplify their financial affairs are often better served by one the following CRT Secondary Planning options:

  • Sell the income interest to a third-party buyer
  • Rollover the income interest to a new CRT with different terms
  • Contribute the income interest to charity

Sterling is the industry leader in CRT Secondary Planning services. Since 2003, we have reviewed thousands of CRTs and have successfully arranged over a thousand sale and rollover transactions.

At no cost or obligation to you, and using just four data points, Sterling will review a CRT and provide an analysis showing what the income beneficiary(ies) would receive selling the income interest to a third party along with a side-by-side comparison to the value of keeping it. If applicable, we will also illustrate how a rollover would work. Fill out our Complimentary Review form, and within two business days we will send you our review comparing the options.

You can reach our CRT team directly at 703-677-8747 or CRT@SterlingFoundations.com.