Charitable Remainder Trusts and Other Planned Giving Tools

Robert E. Williams, Attorney at Law · Updated October 4, 2026 · 6 min read

Many people want their estate plan to reflect more than family. They want to support the church, school, mission or local cause that shaped their lives. The good news is that charitable giving can be built into almost any estate plan, from a simple bequest to a sophisticated trust that pays you income for life and then benefits charity.

This guide explains the most common planned giving tools, with special attention to charitable remainder trusts, and highlights the federal tax rules that apply in 2026. For a personal perspective on why giving matters, read the client letter on charitable giving.

Charitable Bequests in a Will or Trust

The most common planned gift is a bequest: a provision in your will or living trust leaving a specific dollar amount, a particular asset, or a percentage of your estate to charity. Percentage gifts adjust automatically as your estate grows or shrinks. You can also leave a gift that takes effect only if a family beneficiary does not survive you.

To make sure the gift reaches the right place, use the organization's full legal name and, ideally, its federal tax identification number. Some families add language allowing the trustee to choose a similar charity if the named organization no longer exists. Bequests to qualified charities are deductible for federal estate tax purposes, although with the 2026 federal exemption at $15 million per person, most estates owe no estate tax in any case.

Beneficiary Designations on Retirement Accounts

Traditional IRAs and 401(k)s are often the best assets to leave to charity. When individual heirs inherit these accounts, they pay income tax on withdrawals, and most non-spouse beneficiaries must empty the account within ten years. A qualified charity pays no income tax on the same dollars. Leaving retirement funds to charity and other assets (such as a home or brokerage account that receives a stepped-up basis) to family can increase what everyone receives after taxes. The change is usually made with a simple beneficiary designation form.

Qualified Charitable Distributions (QCDs)

If you are 70½ or older, you can direct your IRA custodian to send money directly to a qualified charity. For 2026, each IRA owner can give up to $111,000 this way. The distribution is excluded from your taxable income and can count toward your required minimum distribution once you reach RMD age (currently 73). QCDs benefit people who take the standard deduction and would otherwise receive no tax benefit from charitable gifts. There is also a one-time option to make a QCD of up to $55,000 (2026 figure) to fund a charitable remainder trust or charitable gift annuity. QCDs cannot be made to donor-advised funds or private foundations.

Charitable Remainder Trusts

A charitable remainder trust (CRT) is an irrevocable trust that pays income to you (and, if you wish, a spouse or other beneficiaries) for life or for a term of up to 20 years. When the income period ends, whatever remains goes to one or more charities you have chosen.

How it works

1. You transfer cash, securities or real estate to the trust.
2. The trustee may sell appreciated assets. Because the trust is tax-exempt, there is no immediate capital gains tax on the sale.
3. The trust invests the full proceeds and pays you a fixed or variable income stream.
4. You receive an income tax charitable deduction in the year of the gift for the present value of the charity's future remainder interest.
5. At the end of the term, the remaining assets pass to charity.

Annuity trust or unitrust?

• Charitable remainder annuity trust (CRAT): pays a fixed dollar amount every year. Predictable, but no additional contributions are allowed and income does not grow with the investments.
• Charitable remainder unitrust (CRUT): pays a fixed percentage of the trust's value, revalued each year. Payments rise and fall with the investments, and you can add assets later.

Federal rules require the annual payout to be at least 5% and no more than 50% of the trust's value, and the projected remainder for charity must be at least 10% of the initial value. Income you receive is taxed under a tiered system that generally carries out ordinary income first, then capital gains, then tax-free income.

Who uses a CRT?

CRTs are often a good fit for people who own highly appreciated stock or real estate, want to diversify or create retirement income, and have charitable goals. For example, a long-time Monterey Peninsula homeowner with a rental property purchased decades ago could transfer it to a CRT, have the trust sell it, and receive income from the full sale proceeds rather than from what is left after capital gains tax.

Other Planned Giving Tools

Charitable gift annuities

A contract with a charity in which you transfer cash or property and the charity promises fixed payments for life. It is simpler than a CRT and is offered by many larger charities, universities and ministries.

Charitable lead trusts

The reverse of a CRT: the charity receives payments for a term, and the remainder passes to your family. Lead trusts are mostly used by people with larger estates who want to transfer wealth to the next generation at a reduced gift or estate tax cost.

Donor-advised funds

An account at a sponsoring public charity or community foundation. You receive a deduction when you contribute and recommend grants to charities over time. A donor-advised fund can also be named as a beneficiary in your estate plan.

Private foundations

Appropriate for families who want ongoing control and a lasting family legacy, but with more administrative cost and stricter rules. Some families instead form a public charity; see how to start a nonprofit in California.

Federal Tax Changes Beginning in 2026

The 2025 federal tax law (often called the One Big Beautiful Bill Act) changed charitable deductions starting with 2026 tax years:

• People who take the standard deduction can deduct up to $1,000 (single) or $2,000 (married filing jointly) of cash gifts to public charities. Gifts to donor-advised funds and most private foundations do not qualify.
• For itemizers, charitable deductions are reduced by an amount equal to 0.5% of adjusted gross income.
• For taxpayers in the top bracket, the tax benefit of itemized deductions, including charitable gifts, is capped.

These changes make tools like QCDs and bequests of retirement accounts relatively more attractive for many donors. Tax rules are complex and change frequently, so confirm current law with your tax adviser before making a large gift.

Practical Steps

• List the causes you care about and how you want to be remembered.
• Decide whether to give during life, at death, or both.
• Review IRA and 401(k) beneficiary designations.
• Talk with the charity about how your gift will be used and whether they accept the type of asset you plan to give.
• Coordinate with your overall plan so family members are treated as you intend. See lifetime gifts to family.

Conclusion

Charitable giving and family provision can work together. A simple bequest, a beneficiary designation on an IRA, a QCD during retirement or a charitable remainder trust can each turn your values into a lasting legacy while offering real tax benefits. Even a gift of 5% or 10% of an estate can make a significant difference to a small or local charity. Thoughtful planning ensures your gift arrives where you intend, in the form that does the most good.

Related Articles

• Lifetime Gifts to Family: Annual Exclusion and Gift Tax Rules for 2026
• How to Start a Nonprofit in California: Incorporation to Tax Exemption
• Will vs. Living Trust in California: Which One Do You Need?

This article provides general information about California and federal law as of October 4, 2026. It is not legal advice and does not create an attorney–client relationship.