Charitable Remainder Annuity Trust (CRAT) Calculator

A charitable remainder annuity trust (CRAT) is the fixed-payment sibling of a CRUT: you contribute an appreciated asset to an irrevocable trust, the trust sells it without triggering capital gains tax up front, and it pays you (or another beneficiary) a set dollar amount every year for life or a fixed term, with whatever remains going to charity. Unlike a unitrust, the payment is locked in at funding as a percentage of the initial contribution. It never gets revalued, even if the trust's investments do well or poorly.

That fixed payment is also a CRAT's biggest risk: if the payout rate is too high relative to the trust's growth, the corpus can run dry before the term ends, which is why the IRS requires every CRAT to pass a 5% probability-of-exhaustion test before the charitable deduction is allowed at all. This calculator runs that test alongside the deduction and income projection.

How does this calculator work?

Choose the trust type (one life, two lives, or a fixed term), enter the ages or term length and the IRS §7520 rate for the month of the gift, then the contributed asset's value and cost basis, the trust's assumed growth rate, and the annuity payout rate.

The calculator computes your up-front income tax deduction using the IRS's Table S/B annuity factors (IRC §7520), then runs the Rev. Rul. 77-374 exhaustion test: if the fixed annuity would burn through the trust before the measuring life or term ends with at least a 5% chance, the IRS disallows the deduction outright, and the calculator flags it.

It also projects the trust year by year, and compares the charitable strategy's after-tax income and amount left to beneficiaries against simply keeping the asset and selling it (the "current strategy").

Worked example

A two-life CRAT (ages 65 and 64) funded with $1,000,000 of stock with a $250,000 cost basis, growing at 5% a year, paying a 6% annuity rate, at a 5% §7520 rate.

Fixed annual payment (6% of $1M)

$60,000/yr, every year

Income tax deduction

$183,736

Long-term gains tax avoided

$112,500

5% exhaustion test

would exhaust in 37 yrs; 2.44% survival odds, passes

How the numbers work

The $60,000 payment is fixed the moment the trust is funded (6% of the original $1,000,000), and it stays exactly $60,000 whether the trust grows to $2 million or shrinks toward zero.

At 5% growth against a 6% payout, the trust loses a little ground each year (it grew by $50,000 but paid out $60,000 in year one), so the calculator projects it would eventually be exhausted, in year 37. Because the odds of a 65/64-year-old couple's last survivor still being alive 37 years out are only about 2.4%, well under the IRS's 5% threshold, the trust passes the test and the deduction stands.

Had the payout rate been higher, or growth lower, pushing the exhaustion point earlier, the test could fail. At that point the IRS disallows the deduction entirely, not just reduces it.

A CRAT trades a unitrust's fluctuating income for a guaranteed, unchanging payment, useful if you want payment certainty for budgeting. But that certainty is exactly what creates exhaustion risk, since the payment doesn't shrink automatically the way a unitrust's would in a down market.

Always check the exhaustion test before settling on a payout rate: a rate that looks attractive on paper can invalidate the entire deduction if it's too aggressive relative to the trust's growth assumptions.

The deduction itself comes from an IRS remainder factor you can verify directly, and a charitable lead trust runs the same idea in reverse, paying charity first. For a gift without a trust, a donor-advised fund gives an immediate deduction while letting you grant over time.