Charitable Remainder Trusts for Wisconsin Families
What Happened
A Wisconsin estate planning firm published a detailed breakdown of Charitable Remainder Trusts (CRTs) in October 2026, outlining how families can use this irrevocable trust structure to generate lifetime income while ultimately directing assets to charity. The article, from Krause Estate Planning and Elder Law Center, explains the mechanics of CRT planning and identifies scenarios where the strategy works best for Wisconsin families.
A CRT works by allowing a donor to transfer cash, investments, real estate, or other appreciated property into an irrevocable trust. The trust then makes required payments to at least one noncharitable beneficiary — the donor, a spouse, or another individual — for life or for a term of up to 20 years. When the payment period ends, the remaining trust property passes to one or more qualified charitable organizations. Federal rules require that the actuarial value expected to remain for charity equals at least 10% of the property initially contributed.
The article distinguishes between two primary CRT structures. A Charitable Remainder Annuity Trust (CRAT) pays a fixed dollar amount each year based on the trust's initial value, offering predictable income. A Charitable Remainder Unitrust (CRUT) pays a fixed percentage of the trust's value recalculated annually, meaning payments can rise or fall with investment performance. Both structures require a payout rate of at least 5% and no more than 50%, subject to the 10% charitable remainder requirement.
What It Means
For Wisconsin families holding highly appreciated assets, the CRT structure addresses a common tension: the desire to sell an asset and generate income without triggering a large capital gains tax bill in a single year. Because a CRT is generally tax-exempt, the trust can sell appreciated property and reinvest the full proceeds without immediately paying capital gains tax that an individual seller would ordinarily owe. The source article illustrates this with a straightforward example: stock purchased for $100,000 and now worth $1 million carries a substantial embedded gain. Contributing that stock to a properly structured CRT before any binding sale occurs allows the trust to sell and reinvest the full $1 million. The gain does not disappear — the trust retains the donor's carryover basis, and taxable income and capital gains can flow out to income beneficiaries through annual distributions — but taxation spreads across years rather than concentrating in one.
Wisconsin families evaluating CRTs operate against a favorable state tax backdrop. Wisconsin imposes no state estate or inheritance tax, meaning assets passing at death face only federal exposure. The federal estate tax exemption currently stands at $15,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Sep 15, 2026View source per person, or $30,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Sep 15, 2026View source for a married couple using portability. Most Wisconsin families will not owe federal estate tax, but families holding substantial appreciated assets — real estate, concentrated stock positions, or business interests — still face income tax consequences when those assets are sold. The CRT's deferral and spreading mechanism addresses that income tax exposure directly, making it relevant even for estates well below the federal exemption threshold. Wisconsin also applies a 30% exclusion to long-term capital gains, leaving state tax on the 70% of long-term gain left after a 30% exclusionWis. Stat. § 71.05(6)(b)9 (30% general LTCG exclusion; reaches estates and trusts per § 71.125(1))Verified Sep 15, 2026View source, so state-level capital gains tax remains a real consideration for large asset sales.
Beyond the capital gains strategy, CRT funding may generate a current charitable income-tax deduction. The deduction equals the present actuarial value of the charitable remainder — not the full amount transferred — and depends on the asset value, beneficiary age, payment term length, payout percentage, and applicable federal interest rates. Normal IRS charitable deduction limitations apply. Distributions from the trust follow a specific IRS ordering system: ordinary income first, then capital gains, then other income including certain tax-exempt income, and finally return of principal. Each beneficiary receives a Schedule K-1 reporting their share. This layered tax treatment means CRT planning works best when an estate planning attorney, CPA, financial adviser, and investment professional coordinate the structure together. Families considering a CRT alongside their broader Wisconsin estate plan — including revocable trusts, powers of attorney, and healthcare documents — can find context in the Glossary of Basic Estate Planning Terms, which explains how these instruments relate to one another. For families weighing the cost of trust-based planning against the alternative of probate, the analysis in 7 Reasons for Bypassing Probate provides useful background on what Wisconsin probate typically involves.
Context from SimplyTrust
A Charitable Remainder Trust is an irrevocable structure and falls outside the scope of a standard revocable living trust. SimplyTrust creates revocable living trusts — documents that help Wisconsin families organize assets, name beneficiaries, designate trustees, and avoid probate for the assets held inside the trust. A revocable trust does not carry the tax-deferral or charitable deduction features of a CRT, but it addresses a different and more immediate need: ensuring that assets transfer to the right people, at the right time, without court involvement. Wisconsin probate typically runs 9 months to 12 months, with attorney fees typically ranging from 1.8%Wis. Stat. § 851.40(1) (just and reasonable compensation for services under chs. 851-879, incl. ch. 865 informal administration; no statutory percentage for attorneys — estate value may not be the controlling factor)Verified Sep 9, 2026View source to 2.9%Wis. Stat. § 851.40(1) (just and reasonable compensation for services under chs. 851-879, incl. ch. 865 informal administration; no statutory percentage for attorneys — estate value may not be the controlling factor)Verified Sep 9, 2026View source of the estate. For a $500,000 estate, that translates to roughly $22,090Wis. Stat. § 851.40(1) (just and reasonable compensation for services under chs. 851-879, incl. ch. 865 informal administration; no statutory percentage for attorneys — estate value may not be the controlling factor)Verified Sep 9, 2026View source in attorney fees alone. Families interested in the charitable giving strategies described in the source article — and in how those strategies fit within a complete estate plan — can explore related topics in the article on Estate Planning Charitable Giving and the overview of What Is a Revocable Trust. For situations requiring a CRT or other irrevocable trust structure, an attorney specializing in estate tax planning can provide guidance tailored to the family's specific assets and goals.
