A Charitable Remainder Trust (CRT) is a way for a grantor to donate money or property to a charity and continue to use/receive income from it while alive. After the grantor dies, the beneficiaries receive the income and the charity receives the property. By donating the property, the grantor avoids paying any capital gains tax, and he can also take an income tax deduction for the fair market value of the remainder interest that the trust earned. Also, by donating the property to a charity, you remove it from your estate thereby reducing estate taxes. A useful tip, is that although CRTs are irrevocable, you can transfer the property from one charity to another, as long as the second charity is a qualified charitable organization.

Under code section 664 Charitable remainder trusts-division of trusts pursuant to divorce-gain or loss-gift tax, one can propose a division of a marital trust into two separate trusts. The two new trusts can qualify as CRTs, and they won’t cause the trustees any gains or losses. And, the division of interest in a trust of the divorced tax payers into two separate trusts won’t subject either spouse gift tax because the division is transfer of property pursuant to divorce under Code Sec. 2516. (PLR 200616008)