Split-Interest Charitable Gifts: Need-to-Know FAQs

As charitable planning conversations become more sophisticated, many advisors are revisiting so-called “split-interest gifts” to help clients balance philanthropic goals with income needs. Two of the most common strategies – a charitable gift annuity (CGA) and a charitable remainder trust (CRT) – can both provide clients with lifetime income while ultimately benefiting charitable causes. Despite their similarities, the two vehicles function very differently and may serve distinct client needs.

Understanding when to consider each option can help attorneys, CPAs and financial advisors deliver more customized and impactful planning guidance. Unless your practice specializes in charitable giving, though, you’re not likely to have the rules for CGAs and CRTs at your fingertips. Here are six FAQs to get you started.

What do CGAs and CRTs do for a client?

At a high level, both a CGA and a CRT would allow your client to make an irrevocable charitable gift while retaining an income stream for life or for a term of years. In both cases, your client may qualify for an immediate charitable income tax deduction and a portion of future payments may receive favorable tax treatment. In short, people use CGAs and CRTs to save taxes, make a gift to charity and create an income stream.

Which is easier – a CGA or a CRT?

A charitable gift annuity is generally the simpler of the two arrangements. The client transfers assets to a charitable organization in exchange for a fixed lifetime payment backed by the charity’s general assets. Payment rates are typically based on age and standardized actuarial assumptions. Because the payout is fixed and administration is relatively straightforward, CGAs often appeal to older donors seeking predictability and simplicity. Note that not every charity offers a CGA option; many smaller or mid-sized nonprofits lack the resources, licenses or state registrations needed to manage them.

Which is more flexible – a CGA or a CRT?

A charitable remainder trust offers considerably more flexibility than a CGA, but it is also more complex. A CRT is a separately administered trust – its own legal entity – that pays income to one or more beneficiaries before the remaining assets eventually pass to charity. Unlike a CGA, a CRT can be designed in different ways. A charitable remainder annuity trust (CRAT) provides fixed annual payments, while a charitable remainder unitrust (CRUT) pays a variable amount based on a percentage of the trust’s annually revalued assets.

Which option is better for clients contributing larger assets?

CRTs are often better suited for clients contributing larger or more complex assets. Because the trust can sell appreciated assets without triggering immediate capital gains tax within the trust, CRTs are frequently used in connection with highly appreciated real estate, concentrated stock positions or even business interests prior to a sale.

In addition, CRTs can accommodate multiple beneficiaries, customized payout structures and professional investment management strategies. Clients who want greater flexibility, longer-term wealth planning opportunities or inflation-sensitive income may prefer a unitrust structure over the fixed nature of a CGA.

Of course, that flexibility comes with added responsibilities. CRTs require formal trust administration, annual tax filings, ongoing investment oversight and legal drafting. CGAs, on the other hand, are generally easier for clients to understand and establish.

When is a CGA better?

You may recall that a technique called a “Legacy IRA” was created by the SECURE 2.0 Act, allowing taxpayers aged 70½ or older to make a one-time election for a tax-free Qualified Charitable Distribution to certain CRTs or CGAs. Clients who want to take advantage of the Legacy IRA may find that a CGA is better suited to their needs. The cost of setting up and administering a CRT may not be worth it because the limit for these transactions is $55,000 (2026 level) per person.

What’s the first step in exploring CRTs and CGAs?

As always, the team at IPCF is honored to be your first call whenever charitable giving comes up in a client conversation. If you are exploring CGAs and CRTs, we’ll point you in the right direction so that you can evaluate the rules for each technique and review important questions related to the particular client situation, including what type of asset will fund the gift, the size of the proposed contribution, the client’s income goals, the number of beneficiaries and cost concerns.

Finally, keep in mind that charitable giving conversations are not limited to ultra-high-net-worth households. Many clients today are seeking ways to create reliable retirement income while also making meaningful charitable commitments. Split-interest gifts can help accomplish both objectives simultaneously. We look forward to our next conversation!

This article is provided for informational purposes only. It is not intended as legal, accounting or financial planning advice.