What Is the Difference Between a CRT and a CLT?

When navigating the complex world of estate planning, it’s crucial to understand the various tools available to protect your assets and ensure their proper distribution. Two commonly used structures are Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs). While both involve charitable giving, they differ significantly in how they benefit both you and the chosen charities.

Who Benefits from a CRT?

A CRT is designed to provide income to the grantor (the person setting up the trust) or designated beneficiaries for a specific period. This income stream can be fixed or variable depending on the trust’s terms. At the end of the specified term, the remaining assets are donated to the chosen charity. CRTs offer several advantages:

  • Tax benefits: Grantors may receive immediate tax deductions for the present value of the charitable remainder interest.
  • Income stream: Beneficiaries enjoy a steady income during the trust term.
  • Charitable support: The chosen charity ultimately receives a significant contribution.

Think of it like this: you plant a seed (your assets) in a CRT. You get to enjoy some of the fruit (income) for a while, and then the remaining tree (assets) is donated to a worthy cause.

Who Benefits from a CLT?

In contrast, a CLT prioritizes charitable giving during the initial phase. A percentage of the trust’s assets is distributed annually to the chosen charity for a predetermined period. After this term, the remaining assets are then transferred to non-charitable beneficiaries, such as family members or heirs.

How Does a CRT Work?

Imagine a scenario where you have accumulated significant wealth and want to support your favorite university while also ensuring financial security for your spouse. You could establish a CRT with the university as the ultimate beneficiary. Your spouse would receive annual income payments from the trust during their lifetime, and upon their passing, the remaining assets would be donated to the university.

How Does a CLT Work?

Let’s say you want to leave a legacy for your grandchildren but also believe in supporting medical research. You could create a CLT with a percentage of the trust assets going towards a leading cancer research institute for 20 years. After that period, the remaining assets would be distributed to your grandchildren.

What Happens When Things Go Wrong?

A few years ago, I met with a client who had attempted to set up a CRT on his own without legal guidance. He misunderstood the complexities of calculating the charitable remainder interest and ended up facing significant tax penalties. His initial goal was to provide income for his wife while supporting a local orphanage.

“I thought I could just fill out some forms online,” he lamented, “but it turned out to be much more complicated than I anticipated.”

How Can We Avoid Similar Mistakes?

Fortunately, his situation was rectified through careful planning and legal intervention. We worked together to restructure the trust, ensuring compliance with all applicable regulations and achieving his desired charitable and financial goals.

“Working with a trusted advisor like Ted Cook made all the difference,” he later shared. “He helped me understand the intricacies of CRTs and ensured everything was set up correctly.”


Who Is Ted Cook at Point Loma Estate Planning Law, APC.:

Point Loma Estate Planning Law, APC.

2305 Historic Decatur Rd Suite 100, San Diego CA. 92106

(619) 550-7437

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About Point Loma Estate Planning:



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Point Loma Estate Planning Law, APC. areas of focus:

A Living Trust: also known as an inter vivos trust, is a legal arrangement where you, as the grantor, transfer assets to a trustee who manages them for the benefit of designated beneficiaries, either during your lifetime or after your death, potentially avoiding probate and offering more privacy than a will. Revocable Living Trust: You can change or revoke the trust and get the assets back during your lifetime.

Irrevocable Living Trust: Once established, you cannot change or revoke the trust, and the assets are generally no longer considered part of your estate.

Control over Asset Distribution: You can specify how and when your assets will be distributed to your beneficiaries.

Understanding Trusts and Their Role in Estate Planning

A trust is a legal and fiduciary relationship in which a grantor (also called a settlor) transfers ownership of assets to a third party, known as a trustee, who manages those assets for the benefit of designated beneficiaries. Trusts can be tailored to meet specific goals, including when and how distributions are made to beneficiaries, asset protection, or minimizing estate and income taxes.

One of the key advantages of a trust—particularly a properly funded revocable or irrevocable trust—is that it can allow assets to bypass the probate process. This often means a faster, more private, and potentially less expensive distribution of assets compared to those governed solely by a will.

In the case of irrevocable trusts, assets are typically removed from the grantor’s taxable estate, which may help reduce estate tax liability. However, this comes at the cost of the grantor relinquishing control over those assets.

Trusts may also provide protection from creditors, preserve assets for minors or individuals with special needs, and ensure continuity in asset management if the grantor becomes incapacitated.

These tools are part of estate planning—the process of making legal and financial arrangements in advance to designate who will receive your property after your death, and how that transition will occur. Thoughtful estate planning aims to streamline the administration of your affairs, minimize tax burdens, and reduce stress for your loved ones during an already difficult time.

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