Charitable Remainder Trusts in Canada 2025

Updated March 2025 · 10 min read

A Charitable Remainder Trust (CRT) is a giving strategy that allows a donor to transfer assets to a trust, retain a stream of income for life (or a fixed term), and designate the remaining assets to a registered charity upon death or at the end of the term. It combines income security for the donor with a meaningful charitable legacy — and provides a partial donation tax receipt in the year the trust is established.

How a Charitable Remainder Trust Works

The basic structure is:

1. The donor (settlor) transfers assets — cash, securities, real estate — into an irrevocable trust
2. The donor (or their spouse) receives income from the trust for their lifetime or a fixed term
3. At the donor's death (or end of term), the remaining trust assets pass to one or more designated registered charities
4. In the year the trust is created, the donor receives a donation tax receipt for the actuarial present value of the charity's future remainder interest

The Partial Donation Receipt

The donation receipt is calculated by an actuary based on:

• The fair market value of assets transferred to the trust
• The income interest retained by the donor (amount and duration)
• The donor's age and life expectancy
• The CRA prescribed interest rate used for discounting

For an older donor with a shorter life expectancy retaining a modest income stream, the remainder interest (and therefore the donation receipt) will be larger as a percentage of the assets contributed. For a younger donor retaining a larger income stream, the charitable remainder is smaller.

Example: A 70-year-old donor contributes $500,000 to a CRT retaining income of $20,000/year for life. The actuarial present value of the charity's remainder interest might be $300,000–$350,000. The donor receives a donation receipt for that amount in year one.

Tax Treatment of CRT Income

Income paid from the CRT to the donor is generally taxable as income in the donor's hands — the character of the income (interest, dividends, capital gains) typically flows through to the beneficiary in a manner consistent with how it was earned in the trust. The specific tax treatment depends on the trust structure and how income is distributed.

Capital gains arising from assets sold within the trust may also be allocated to the income beneficiary. Unlike the direct donation of securities (which eliminates capital gains entirely), contributing appreciated property to a CRT triggers a deemed disposition at fair market value — the donor realizes the capital gain in the year of contribution but receives the offsetting partial donation receipt.

CRT vs. Direct Donation of Securities

For donors holding appreciated securities who want to retain income, a CRT offers a middle path between:

• Donating securities outright (maximum tax benefit, no retained income)
• Keeping the securities personally (full income and control, no charitable benefit)

However, the direct donation of appreciated securities remains more tax-efficient if the donor doesn't need retained income. The CRT is valuable specifically when the donor wants both current income security and an eventual charitable legacy.

Advantages of a Charitable Remainder Trust

• Provides income security for the donor throughout retirement
• Creates a meaningful charitable legacy without reducing current cash flow
• Immediate partial donation tax receipt reduces current-year tax
• Assets in the trust avoid probate on death
• Charitable designation is irrevocable — assets are protected from estate creditors
• Simplifies estate administration for the charitable portion of the estate

Limitations and Considerations

• The donation is irrevocable — you cannot change your mind and recover the assets
• The partial donation receipt may be less valuable than a full outright gift
• CRT setup requires legal drafting and actuarial calculations (professional costs)
• Ongoing trust administration and tax filing requirements
• Less flexibility than a donor-advised fund for directing specific charitable grants

Who Benefits Most from a CRT?

A Charitable Remainder Trust works best for:

• Retirees who want guaranteed income from an asset but ultimately want it to go to charity
• Donors with appreciated real estate or business interests who want to give eventually but need cash flow now
• High-net-worth individuals whose estate exceeds personal and family needs and who have strong charitable intent
• Donors seeking to reduce a taxable estate while maintaining income

Setting Up a CRT in Canada

Establishing a charitable remainder trust in Canada requires:

1. An estate lawyer to draft the trust deed
2. An actuary to calculate the present value of the charitable remainder interest for the donation receipt
3. CRA guidelines on what constitutes a valid charitable gift for the receipt to be issued
4. A trustee to manage the trust assets (often a bank trust company or the charity itself)

Consult with a philanthropic advisor, estate lawyer, and tax accountant before proceeding. The rules are specific and the structure must be set up correctly for the donation receipt to be valid.