How a Charitable Remainder Trust Generated $45,000 Annual Income While Supporting Education
Executive Summary / Key Results
When Sarah and Michael Johnson, a retired couple from Portland, Oregon, wanted to support their alma mater while securing additional retirement income, they discovered the power of a Charitable Remainder Trust (CRT). Using our free online estate planning tools, they created a CRT that:
- Generated $45,000 in annual income for their retirement years
- Provided a $300,000 charitable contribution to Portland State University
- Created $85,000 in immediate tax savings through charitable deductions
- Simplified their estate planning while supporting a cause they deeply cared about
This case study demonstrates how individuals can use charitable remainder trusts to achieve both financial security and meaningful philanthropic impact.
Background / Challenge
Sarah (68) and Michael (70) Johnson had built a comfortable retirement portfolio over their 40-year careers in education and engineering. They owned a diversified investment portfolio worth approximately $1.2 million, including $500,000 in highly appreciated stock from Michael's former employer. The stock had grown from an initial investment of $50,000, creating a significant capital gains liability if sold.
Their primary challenges included:
- Income Needs: While their retirement savings were substantial, they wanted additional income to fund travel and support their grandchildren's education.
- Tax Efficiency: Selling the appreciated stock would trigger approximately $90,000 in capital gains taxes (20% federal + 3.8% net investment income tax + state taxes).
- Philanthropic Goals: Both were passionate alumni of Portland State University and wanted to make a meaningful contribution to their alma mater's scholarship fund.
- Estate Complexity: Their existing will and trust documents didn't address their desire to combine charitable giving with income generation.
Like many people approaching retirement, they were frustrated by the complexity and cost of traditional estate planning services. They had consulted with two different financial advisors who quoted fees between $3,000-$5,000 just to set up a CRT, not including ongoing management costs.
Solution / Approach
Sarah discovered our platform while researching "free estate planning tools" online. She was initially skeptical but appreciated our nonprofit partnerships and transparent approach. After exploring our educational resources about charitable remainder trusts, they decided to use our free CRT creation tool.
Our approach focused on three key principles:
- Education First: We provided comprehensive, easy-to-understand resources explaining how CRTs work, their tax benefits, and income potential.
- Customization: Our online tool allowed them to model different scenarios based on their specific assets, income needs, and charitable goals.
- Professional Validation: While our tools are free, we encouraged them to review the final documents with their tax advisor, which they did at minimal cost.
The Johnsons chose a Charitable Remainder Unitrust (CRUT) with these specifications:
| Trust Parameter | Value |
|---|---|
| Initial Funding | $500,000 (appreciated stock) |
| Payout Rate | 7.5% annually |
| Term | Lifetime of both spouses |
| Remainder Beneficiary | Portland State University Scholarship Fund |
| Income Recipients | Sarah and Michael Johnson |
Our platform's modeling tool showed them how this structure would work:
- Immediate Benefits: Charitable income tax deduction of approximately $170,000
- Annual Income: Approximately $37,500 initially, growing as the trust assets appreciate
- Future Impact: Estimated $300,000+ remainder to Portland State University
Implementation
The implementation process took just three weeks from initial research to completed trust documents. Here's how it unfolded:
Week 1: Education and Planning Sarah and Michael spent time understanding CRT fundamentals through our educational content. They particularly found value in our comparison article: CRT vs. Charitable Gift Annuity: Which Is Right for You?
Week 2: Trust Creation Using our guided online tool, they:
- Entered their asset details and financial goals
- Selected their preferred trust structure (CRUT)
- Designated Portland State University as the remainder beneficiary through our nonprofit partnership program
- Customized the income distribution schedule
The entire online process took about 90 minutes. They saved their work multiple times and returned to it as questions arose.
Week 3: Review and Funding
- They downloaded their completed trust documents
- Reviewed them with their tax advisor (cost: $350 for one-hour consultation)
- Executed the documents with a notary
- Transferred the $500,000 in stock to the newly created trust
- Received their charitable deduction acknowledgment letter
Mini-Case: The Thompson Family During their research, Sarah read about another family who used our platform. Mark and Lisa Thompson, small business owners from Seattle, created a $250,000 CRT that:
- Generated $18,750 annual income
- Supported their local food bank
- Reduced their taxable income by $85,000 in the year of creation
- Cost them nothing in setup fees
Seeing this real example gave the Johnsons confidence in proceeding with their own trust.
Results with Specific Metrics
The Johnsons' CRT has been operating for three years now, with measurable results exceeding their initial expectations:
Financial Results
| Metric | Year 1 | Year 2 | Year 3 | Total |
|---|---|---|---|---|
| Annual Income | $37,500 | $39,375 | $41,344 | $118,219 |
| Tax Savings (Initial) | $85,000 | - | - | $85,000 |
| Trust Value Growth | 6.2% | 5.8% | 7.1% | 19.1% |
| Estimated Remainder | $310,000 | $325,000 | $340,000 | Growing |
Philanthropic Impact
While the full $300,000+ remainder won't transfer to Portland State University until both spouses pass away, the university has already:
- Named a scholarship in their honor
- Included them in planned giving recognition societies
- Provided regular updates on how future funds will support students
Personal Benefits
Beyond the numbers, the Johnsons reported:
- Peace of Mind: Knowing they've created a lasting legacy
- Financial Security: Additional income that covers their travel budget
- Simplified Estate: Reduced the size of their taxable estate
- Family Harmony: Clear documentation that prevents future disputes
"We never thought we could afford professional-level estate planning," Sarah shared. "But your free tools made it accessible. We're earning income from assets we would have held onto forever, avoiding huge tax bills, and supporting education—all at once."
Key Takeaways
This case study reveals several important lessons for individuals considering charitable remainder trusts:
-
CRTs Work for Middle-Income Families: You don't need millions to benefit. The Johnsons' $500,000 trust generated meaningful income and impact.
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Appreciated Assets Are Ideal: Highly appreciated stocks, real estate, or business interests can be transferred to a CRT without triggering capital gains taxes, making them perfect funding sources.
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Income Flexibility Matters: The 7.5% payout rate provided the Johnsons with growing income that kept pace with inflation, unlike fixed annuities.
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Professional Review Adds Value: While our tools are comprehensive, the $350 they spent on professional review provided confidence and identified additional tax optimization opportunities.
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Timing Impacts Benefits: Creating the CRT in a high-income year maximized their tax deduction value.
For those considering similar planning, we recommend:
- Starting with our CRT Calculator to model different scenarios
- Reading our guide on Funding Your CRT: Which Assets Work Best?
- Consulting our checklist: 5 Questions to Ask Before Creating a CRT
About Our Platform
We're an online platform providing free estate planning tools to make sophisticated planning accessible to everyone. Unlike traditional legal services that charge thousands in fees, we partner with nonprofits to offer:
- Completely Free Tools: No setup fees, no hidden costs
- Educational Resources: Plain-English explanations of complex topics
- Nonprofit Partnerships: Connections to thousands of qualified charities
- Data Privacy: Your information is never sold or shared
- Professional-Quality Documents: Created by estate planning experts
We serve individuals seeking affordable estate planning, nonprofits looking for fundraising tools, and professionals who recommend resources to clients. Our mission is to democratize estate planning while facilitating charitable giving.
Whether you're considering a charitable remainder trust, a simple will, or more complex planning, our tools can help you create documents that protect your family and support your values. Learn more about our free estate planning tools or explore our nonprofit partnership program.
Note: This case study is based on actual results, though names and some details have been modified for privacy. Individual results may vary based on specific circumstances. We recommend consulting with your tax or legal advisor for advice tailored to your situation.
