Charitable Remainder Trusts
Provide Income for Yourself – and Future Support for Ministry
A Charitable Remainder Trust (CRT) is a giving option that allows you to support the churches and ministries you care about through the Hawaii Baptist Foundation, while receiving income for life or a set number of years.
This option is often used by individuals who hold appreciated assets and want o balance personal financial needs with long-term ministry impact.
Why Consider a Charitable Remainder Trust?
A CRT may be a good fit if you want to:
• Receive income for life or a defined term
• Support your church or ministries in a significant way
• Use appreciate assets without triggering immediate capital gains taxes
• Create a thoughtful plan that reflects both generosity and stewardship
• Simplify assets such as real estate or long-held investments
How a Charitable Remainder Trust Works
• Capital Gains Taxes may be reduced or avoided by using a CRT
• When the trust ends, the remaining value is distributed through the Hawaii Baptist Foundation to the churches and ministries you designate
• Through the process, HBF works with you and your advisers to ensure the trust aligns with your goals and values
Types of Charitable Remainder Trusts
There a two common forms of CRTs:
• Charitable Remainder Annuity Trust (CRAT)
Provides a fixed payment each year
• Charitable Remainder Unitrust (CRUT)
Provides payments based on a percentage of the trustʻs value, and will change each year
We can help you understand which option may be most appropriate for your situation.
Assets Commonly Used to Fund a CRT
• Appreciated real estate
• Publicly traded stock or mutual funds
• Business interests (in appropriate circumstances)
• Cash
CRTs are especially helpful when an asset has increased significantly in value where selling it outright would result in substantial taxes.
A Practical Example
A couple owns an investment property in Honolulu valued at $1,000,000. Over the years, the property has appreciated significantly, but managing tenants, repairs, and ongoing expenses has become increasingly burdensome.
Rather than selling the property outright and facing substantial capital gains taxes, they donate the property to a Charitable Remainder Trust.
• Trust value: $1,000,000
• Minimum CRT Payout Rate 5%
• Annual Income: $50,000 per year
The trust provides them with $50,000 in annual income, paid often quarterly, without the responsibilities of property management.
When compared to the realities of rental ownership in Honolulu – where net rental income after maintenance, insurance, property taxes, vacancies, and management cost often falls well below 5% – the CRT offers a predictable income stream and significantly reduces day-to-day hassles.
When the trust ends, the remaining value is distributed through the Hawaii Baptist Foundation to support the churches and ministries they designate.
A Hawaii Example: Using a CRT as a 1031 Exit Strategy
Many property owners in Hawaii have built their real estate portfolios over decades using 1031 exchanges – reinvesting from one property into another to defer capital gains taxes. While this strategy can be effective during the accumulation years, it often becomes less practical later in life.
At some point, continuing to exchange properties may no longer meet personal or financial needs.
The Situation
A long-time Hawaii resident owns an investment property valued at $1,000,000. Over the years, the property has been exchanged multiple times through 1031 exchanges, resulting in a very low cost basis.
If the property were sold outright today:
• Capital gains taxes could be significant
• A large portion of the sale proceeds would go toward federal and state taxes
• The owner would still need to decide how to reinvest or manage the remaining funds
At the same time, the owner is reaching a stage in life where:
• Cash flow is increasingly important
• Medical, long-term care, or family expenses may be a concern
• The responsibilities of property ownership are becoming burdensome
There is a desire to simplify, not acquire another replacement property.
How a Charitable Remainder Trust Can Help
Instead of selling the property outright, the owner contributes the property to a Charitable Remainder Trust.
The Trust then sells the real estate.
Because the sale occurs inside the trust, capital gains taxes may be reduced or avoided at the time of sale.
The trust then provides ongoing income to the donor.
Example With Numbers
• Property Value: $1,000,000
• CRT Payout Rate: 5% (minimum required)
• Annual Income: $50,000 per year
The donor now receives steady income without dealing with tenants, repairs, or property management – income that can help cover medical expenses, living costs or other personal needs.
When the trust ends, the remaining value is distributed through the Hawaii Baptist Foundation to support the churches and ministries the donor chooses.