In 2025, the Charitable Remainder Unitrust (CRUT) continues to be a powerful tool for Texas residents seeking to balance philanthropy with financial and tax planning goals. By combining charitable giving with income and estate tax savings, a CRUT offers benefits to both the donor and the charitable organizations they wish to support, all while addressing the unique opportunities and challenges faced by Texans as a Houston, TX estate planning lawyer who has been with our firm since its founding in 2021 can share.
What Is A CRUT?
A Charitable Remainder Unitrust is a type of irrevocable trust designed to benefit both the trust creator (or their designated beneficiaries) and one or more charitable organizations. When you establish a CRUT, you transfer assets into the trust. These assets can include cash, securities, real estate, or other highly appreciated property. For Texas residents, this is particularly advantageous as Texas is home to a robust real estate market and numerous charitable organizations that align with local values and community goals.
Once inside the trust, the assets are sold, reinvested, and used to generate income for a specified term, which can last for up to 20 years or the lifetime of the income beneficiaries. This setup allows Texans to preserve their wealth while supporting the causes that matter most to them while also protecting privacy if needed.
Income Tax Benefits
One of the key advantages of a CRUT is the ability to reduce income taxes. When you establish a CRUT and transfer assets into it, you may qualify for an immediate income tax deduction. The amount of the deduction is based on the present value of the remainder interest that will eventually go to charity. In 2025, this deduction remains a valuable incentive for high-income earners in Texas who are philanthropically inclined.
For example, suppose a Texan transfers $1 million worth of appreciated stock into a CRUT. By doing so, they avoid paying capital gains taxes on the sale of the stock because the trust, as a charitable entity, can sell the assets tax-free. Instead of incurring a significant tax liability, they receive an income stream from the trust and an immediate charitable deduction.
The income tax deduction not only reduces taxable income in the year the trust is established but can also be carried forward for up to five additional years if it exceeds annual charitable contribution limits. For Texas residents, this can mean more resources to invest in their families, businesses, or local community initiatives.
Estate Tax Benefits
With the federal estate tax exemption set at $13.99 million per individual in 2025, many Texas residents are looking for strategies to minimize the impact of estate taxes. A CRUT can remove assets from your taxable estate, potentially reducing or eliminating estate tax liability.
By transferring assets to a CRUT, Texans effectively remove those assets from their estate. This means their value will not be subject to estate taxes upon death. This is particularly advantageous for Texans with estates exceeding the exemption limit or those who anticipate the estate tax exemption to decrease in future years.
Additionally, because the CRUT’s assets are earmarked for charity after the income term, the trust can serve as a philanthropic legacy while simultaneously addressing tax concerns. Texans can direct these assets to support local charities or causes that have a lasting impact on their communities.
Flexible Income Stream
Unlike some other types of trusts, a CRUT provides flexibility in how the income is distributed. The annual payment to the income beneficiary is calculated as a fixed percentage of the trust’s value, which is revalued each year. This means the income can increase or decrease depending on the trust’s performance.
For Texans looking to create a retirement income stream, a CRUT can be structured to provide a steady source of funds. Additionally, the flexibility to reinvest assets within the trust tax-free allows for potential growth, maximizing the benefits for both the income beneficiaries and the charitable remainder. No matter your age, you should have estate planning in place such as this that can help plan for retirement.
Supporting Charitable Goals In Texas
A CRUT allows donors to support their favorite charitable organizations while enjoying significant tax benefits. For Texans, this often means supporting local institutions such as hospitals, schools, cultural organizations, and faith-based charities. The charities benefit from the remainder interest in the trust, which can be a substantial gift depending on the performance of the trust’s assets.
This dual-purpose strategy appeals to Texas residents who want to make a meaningful impact through philanthropy without compromising their financial security. By naming charities as remainder beneficiaries, donors can ensure that their philanthropic vision aligns with the unique needs and values of their communities.
Planning Tips For Texans
While a CRUT offers substantial benefits, careful planning is essential to maximize its potential:
- Asset Selection: Texans should consider transferring highly appreciated assets, such as oil and gas interests, real estate, or securities, into the CRUT to maximize capital gains tax savings.
- Trust Term: Decide whether to base the trust term on a fixed number of years or the lifetime of the income beneficiaries. This decision will impact both the income stream and the charitable remainder.
- Payout Percentage: Select a payout percentage that aligns with your income needs and charitable goals. Keep in mind that the IRS requires a minimum remainder value for the charity, so the payout percentage cannot be excessively high.
- Charity Selection: Choose one or more charitable organizations that align with your values and ensure they qualify as tax-exempt entities under IRS guidelines. For Texans, this could include supporting local organizations that address state-specific challenges, such as disaster relief or education.
- Professional Guidance: Work with an experienced Texas estate planning attorney and financial advisor to structure the CRUT in a way that meets your objectives while complying with legal and tax regulations.
In 2025, the Charitable Remainder Unitrust remains a versatile tool for Texas residents seeking to achieve both financial and philanthropic goals. By leveraging the income and estate tax benefits of a CRUT, Texans can reduce their tax liabilities, create a flexible income stream, and leave a lasting charitable legacy. With proper planning and the right team of advisors, a CRUT can be a win-win solution for those who want to make a difference in Texas while protecting their financial future. Stuart Green Law, PLLC has been working on estate plans for families that protect their assets. We are licensed in Texas, Kentucky, Pennsylvania, and South Dakota, so contact us for help today.