Charitable Remainder Trust: Definition and How It Works in California

By Eric Ridley, attorney, Ridley Law. Updated September 2026.

A charitable remainder trust is an irrevocable trust that pays income to the donor or other named people for life or for a term of up to 20 years, then passes what remains to charity. The donor generally receives an income tax deduction when the trust is funded.

How it works in California

Charitable remainder trusts are creatures of federal tax law, not California law. Under 26 U.S.C. § 664, there are two versions: a charitable remainder annuity trust, which pays a fixed dollar amount each year, and a charitable remainder unitrust, which pays a fixed percentage of the trust’s value as revalued annually. For either version, the payout has to be at least 5 percent and no more than 50 percent of the trust’s value. See how a charitable remainder unitrust can pay you for life and support a cause you love for how the unitrust version works in practice.

Section 664 also requires that the charity’s projected remainder interest equal at least 10 percent of the value placed in the trust when it’s funded. That rule limits how long a payout term can run and how large the payout percentage can be; a trust that pays out too much for too long, to too young a beneficiary, won’t qualify no matter how it’s drafted.

Why it matters

For example, a donor funds a charitable remainder unitrust with a piece of highly appreciated stock, sells the stock inside the trust without triggering capital gains tax at the time of the sale, and receives an income stream from the full value of the proceeds for the rest of her life. When she dies, whatever remains in the trust passes to the charity she named.

Common mistakes

Assuming any trust that eventually benefits a charity qualifies as a charitable remainder trust; the payout and 10 percent remainder rules under § 664 have to be met precisely. Funding the trust with an asset that’s hard to value or sell, which complicates both the annual payout calculation and the eventual gift to charity. Treating the income tax deduction and the income stream as the only benefits, without also considering whether the trust fits the donor’s overall estate plan. See what online discussion of charitable remainder trusts gets right and wrong for common misconceptions.

Related terms

• Irrevocable Trust: the broader category of trust a charitable remainder trust belongs to.
• Bequest: an outright gift to charity by will or trust, an alternative that skips the income interest.
• Marital Deduction: a separate federal rule that can work alongside charitable planning when a spouse is also a beneficiary.

Part of the California estate planning glossary. For the full treatment, see CRUT: Unlock Income & Support Charity.