Understanding Charitable Remainder Trusts and the 10% Rule - What Happens When Assets Crash?

Thanks for explaining that! So to be clear, if the trust assets tank in value after it's established, I'm not in trouble with the IRS for violating the 10% rule. That's a relief. But what happens to the annuity payments if there's not enough left to pay the fixed amount? Would my mom just get whatever is left until it runs out? Or would I have to contribute more assets to keep the payments going?

The CRAT (Charitable Remainder Annuity Trust) is obligated to make the fixed dollar amount payments regardless of the trust's performance. If the assets drop significantly and can't support the required payments, the trustee would need to distribute the remaining principal to satisfy the payment obligations until the trust is depleted. The trust doesn't require additional contributions from you - it's an irrevocable arrangement after all. This is actually why many financial advisors recommend using a CRUT (Charitable Remainder Unitrust) instead of a CRAT for volatile assets like cryptocurrency. With a CRUT, the payment is a fixed percentage of the trust's value recalculated each year rather than a fixed dollar amount, so payments automatically adjust downward if assets decline in value.

Did they actually help with the practical side of what to do after your assets crashed? I'm curious because I'm considering setting up a CRT with some Amazon stock that's been volatile lately. Did they give advice on how to restructure things or just confirm you weren't breaking rules?

I'm a bit skeptical about these AI tax tools. How do you know they're giving accurate info? Does an actual tax attorney review anything or is it all automated? Seems risky to trust AI with something as complex as charitable trusts where mistakes could be costly.

They definitely helped with the practical side. They reviewed my portfolio allocation inside the trust and suggested moving from my concentrated tech position to a more diversified approach to prevent further depletion. The report included specific reallocation recommendations. Regarding accuracy, their system uses AI for the initial analysis, but then human tax experts review everything before you get your final report. I was initially skeptical too, but they provided clear citations to relevant tax codes and regulations. They even spotted a minor compliance issue in my trust document that my original attorney had missed.

Wait, how does this actually work? I've been calling the IRS for weeks about my trust situation and just get disconnected or wait for hours. Are you saying this service somehow gets you to the front of the IRS phone queue? That sounds too good to be true.

I've heard of services like this before and they sound suspicious. The IRS phone system is notoriously bad - how could any third party service possibly get around that? And wouldn't giving your personal info to some random company create privacy risks? Seems sketchy to me.

It works by using their system that continuously redials and navigates the IRS phone tree until it gets through, then it calls you and connects you directly to the IRS agent. You don't jump the queue - they just handle the frustrating part of constantly redialing when you get disconnected. Regarding privacy concerns, they don't need access to your tax information at all. They just need your phone number to call you back when they reach an agent. You're the one who speaks directly with the IRS, and the service disconnects from the call once you're connected. I understand the skepticism - I felt the same way until I tried it and got through to someone who actually answered my CRT questions.

That's a really good point I hadn't considered! So I could put the crypto in, get the tax deduction and avoid the capital gains, then have the trustee immediately sell and diversify into something more stable to ensure the income payments continue? Are there any rules against doing that right away?

There are no rules against immediate diversification - that's actually considered prudent trustee behavior. The trust can sell the crypto without triggering the capital gains that you would have faced personally. The only caveat is that the trustee must act independently in the best interest of both the income beneficiary and the remainder charity. Most well-drafted CRTs include investment provisions that specifically authorize or even direct the trustee to diversify. Just make sure whoever you select as trustee (whether it's you, a family member, or a professional) understands their fiduciary responsibilities. Many people make the mistake of setting up the trust then keeping the same concentrated position, which defeats one of the major benefits of the CRT structure.

I set up a CRUT (not a CRAT) with Bitcoin last year. The key challenge was getting proper valuation documentation for the IRS. We used the average of three exchanges at exactly the same time to establish FMV. Also, the trustee immediately converted to a diversified portfolio to avoid exactly the scenario OP is worried about. No regrets so far - saved a ton on capital gains and the income stream is stable now that we're not at the mercy of crypto volatility.

This is incredibly helpful information! I hadn't heard of a "flip CRUT" before but it sounds like exactly what I need for my situation. The idea of starting with income-only payments until the assets can be diversified makes so much sense for volatile investments like crypto. Could you explain a bit more about what typically serves as the "triggering event" for the flip? Is it usually just the sale and diversification of the original assets, or are there other common triggers people use? And does setting up this type of structure significantly complicate the trust documents or make it more expensive to establish? I'm wondering if this approach would work for my crypto situation where I want to avoid immediate capital gains but also don't want to risk depleting the trust if the market crashes again.