How CRTs Work
The IRC §664 charitable remainder trust structure
A Charitable Remainder Trust (CRT) under IRC §664 is a split-interest trust: you receive income during your lifetime, and the remainder goes to a designated charity when you die (or at the end of a specified term). There are two types:
| Feature | CRAT (Annuity Trust) | CRUT (Unitrust) |
|---|---|---|
| Payout type | Fixed dollar amount annually | Fixed percentage of trust value annually |
| Payout range | 5–50% of initial value | 5–50% of annual value |
| Additional contributions | Not allowed | Allowed |
| Inflation protection | None — fixed amount | Yes — payout grows with trust value |
| If trust grows | More goes to charity | Your payout increases |
| If trust shrinks | Payout stays fixed (trust may exhaust) | Your payout decreases |
Transfer Stock Irrevocably to CRT
You contribute appreciated stock into the CRT. This is a completed gift — you can never get the stock back. You receive an income tax deduction based on the charitable remainder value.
Trust Sells Stock Tax-Free
The CRT sells the contributed stock with no capital gains tax (the trust is tax-exempt under §664). The full proceeds are reinvested — no tax drag.
Receive Annual Income
The trust pays you a fixed annuity (CRAT) or unitrust percentage (CRUT) annually. Typical payouts: 5–8%. Income is taxed to you based on a four-tier system (ordinary income first, then capital gains, tax-exempt, return of principal).
Remainder Goes to Charity
At death or trust term end, whatever is left in the trust goes to the designated charity. This is irrevocable — you chose the charity when you created the trust.
The Catch
What CRT advocates don't emphasize enough
Irrevocable — Permanent Transfer
Once stock enters a CRT, you can never get it back. You can't change your mind, access the principal, or redirect the assets. If your circumstances change, if you need the money, if you want to leave it to your children instead — too bad. It's gone.
Lower Income Than Embark (5–8% vs 10%+)
CRTs typically pay 5–8% annually. Embark targets 10%+. On a $5M position, that's $250K–$400K/year (CRT) vs $500K+/year (Embark). Over 20 years, the income gap is $2M–$5M.
You Lose the Stock — No Upside Participation
The CRT sells the stock immediately. You no longer have any exposure to the appreciated position. If the stock doubles after you contribute it, that upside belongs to the trust (and eventually to the charity), not to you.
CRT Income Is Taxed (Four-Tier System)
CRT distributions follow a four-tier tax system: ordinary income first (highest tax rate), then capital gains, then tax-exempt income, then return of principal. In practice, most CRT income is taxed at ordinary income rates initially.
The tax deduction isn't as large as it sounds.: The charitable deduction equals the present value of the remainder interest — what the charity is expected to receive. For a 6% payout with a 20-year term, the deduction might be only 20–30% of the contributed value. On a $5M contribution, that's a $1M–$1.5M deduction — significant, but it doesn't offset the irrevocable loss of the stock.
Head-to-Head
CRT vs Embark — full comparison
| Dimension | Charitable Remainder Trust | Embark §721 SPV |
|---|---|---|
| Annual income | 5–8% ($250K–$400K on $5M) | 10%+ ($500K+ on $5M) |
| Tax at contribution | $0 + income tax deduction | $0 (§721 nonrecognition) |
| Keep stock position | No — trust sells immediately | Yes — economic exposure retained |
| Upside participation | No — stock sold, trust reinvests | Yes — full upside on your stock |
| Reversibility | ⛔ Irrevocable — permanent | ✓ Partnership structure |
| Charitable intent required | Yes — remainder goes to charity | No charitable requirement |
| Estate planning | Removes asset from estate | Partnership interest in estate |
| Complexity | High (trust setup, annual filings, IRS rules) | Moderate (SPV formation, K-1 reporting) |
| Margin call risk | None | None |
| Best for | Genuine charitable intent + income need | Income generation + position retention |
The Embark Strategy
Generate Income on Your Appreciated Stock — Without a Tax Event
Engineers at Google, Meta & Apple use Embark’s IRS §721 strategy to generate 10%+ targeted income on concentrated positions — keep your stock, participate in upside, with no taxable event.
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The Math
$5M position: CRT vs Embark over 20 years
CRT at 6% Payout (CRUT)
$6,000,000
Annual income: $300K (6% of $5M, assuming stable trust value). Over 20 years: $6M in income + $1.25M charitable deduction value. But: stock is gone. Remainder goes to charity. You and your heirs get $0 of the principal.
Embark §721 SPV at 10%+
$10,000,000+
Annual income: $500K+ (10% of $5M). Over 20 years: $10M+ in income. Plus: you still hold the stock position. No irrevocable transfer. No charitable remainder. Full upside.
20-Year Income Gap: $4M+ more income with Embark, plus you keep the stock. CRT makes sense only if the charitable gift is something you genuinely want — not as an income optimization strategy.
When CRT Is Right
The genuine use case for charitable remainder trusts
CRTs are powerful tools — when used for the right reasons. They're the best option when:
Do
- Use a CRT when you have genuine, deep charitable intent — you want a specific charity to receive a significant gift
- Use a CRT when estate reduction is a primary goal — removing assets from your taxable estate
- Use a CRT when you want to eliminate capital gains AND you don't need the stock anymore
- Consider a CRUT over a CRAT for inflation protection (payout adjusts with trust value)
Don't
- Don't use a CRT primarily for tax avoidance — the irrevocable transfer costs more than the tax savings in most cases
- Don't use a CRT if you might need access to the principal later — there is no undo
- Don't use a CRT if your primary goal is income — Embark pays 10%+ vs CRT's 5–8%
- Don't use a CRT to 'lock up' stock from yourself — there are better tools for behavioral discipline
The hybrid approach: contribute a portion of your stock to a CRT for your charitable giving goals, and contribute the remainder to Embark's §721 SPV for maximum income on the portion you want to keep. See our complete monetization strategy overview for the full decision framework.
FAQ
Frequently asked questions
Can I change the charity after setting up the CRT?
In most cases, yes — you can change the charitable beneficiary during the trust's term (unless the trust document restricts it). But you cannot change the fact that the remainder goes to some charity. The irrevocable part is the structure, not necessarily the specific charity.
What happens if the CRT runs out of money?
If a CRAT depletes its assets (because the fixed payout exceeds investment returns), payouts stop. You lose the income AND the stock. This is a real risk with high fixed-payout CRATs in a low-return environment.
Is the charitable deduction worth it?
The deduction is typically 20–40% of the contributed value, depending on payout rate, term, and IRS discount rate (§7520 rate). At a 37% marginal tax rate, a $1.25M deduction saves ~$462K in taxes. Meaningful, but you're giving up a $5M asset permanently.
Can I use both a CRT and Embark?
Yes — this is often the optimal approach. Contribute the portion you want to donate to a CRT, and contribute the portion you want to keep to Embark's §721 SPV. You get the charitable deduction on the CRT portion and 10%+ income on the Embark portion.
Monetize Appreciated Stock Series
5 of 7
Keep Your Stock. Earn More Income.
Generate Income on Your Appreciated Stock — Without a Tax Event
CRTs require an irrevocable transfer — once your stock is in the trust, you can never get it back. Embark's §721 SPV generates 10%+ targeted income with no irrevocable commitment. You keep your stock position.