Definition
A Charitable Remainder Trust (CRT) is an irrevocable trust that distributes income to non-charitable beneficiaries (typically the donor or family members) for a specified term or lifetime, after which the remaining assets pass to designated charitable organizations. CRTs provide immediate tax benefits while deferring capital gains.
Significance in Alternative Asset Valuation
CRTs are particularly powerful tools for highly appreciated alternative assets:
- Defer capital gains: Assets sold within the trust avoid immediate capital gains taxation
- Income stream: Convert illiquid assets into income-producing investments
- Charitable deduction: Receive immediate deduction for present value of charitable remainder
- Estate reduction: Remove appreciated assets from taxable estate
Accurate valuation is critical at multiple stages:
- Contribution: Determines charitable deduction amount
- Unitrust payments: Annual distributions based on trust value (for CRUTs)
- Remainder interest: Calculation of charitable remainder requires actuarial analysis
For alternative assets, the initial valuation must withstand IRS scrutiny, as overvaluation affects the immediate deduction and may trigger penalties.
How Impossival Approaches This
We provide valuations suitable for CRT contribution documentation, with the market analysis and comparable sales data needed to support charitable deduction claims. Our valuations help ensure trust funding values are defensible.
Related Concepts
• Estate Planning - Broader context for CRT strategies • Fair Market Value - Standard for contribution valuation • Capital Gains - Tax deferred through CRT structure • Charitable Deduction - Immediate tax benefit from CRT funding