A Washington charitable trust lets you support the causes you care about while also providing income for yourself or your family, reducing federal income tax, and, importantly for Washington residents, reducing the Washington estate tax. Washington imposes its own estate tax at a threshold far below the federal estate tax, which reaches only a small fraction of estates, so a charitable remainder or lead trust can do more work here than it does in states without an estate tax, such as Idaho. Washington also has its own Charitable Trusts Act, which gives the state oversight of trustees who hold property for charitable purposes.
This page explains the main types of charitable trusts, the federal tax rules in IRC § 664 and related sections, how Washington’s estate tax and capital gains excise tax affect the analysis, how community property is handled, and the role of the Secretary of State and the Attorney General under chapter 11.110 RCW. For the general rules that govern all Washington trusts, see the Washington trusts hub, and for how charitable planning fits into the rest of your plan, see the Washington estate planning page. A charitable trust often works alongside a WA revocable trust and the gifts described on the Washington wills page.
Why Washington Donors Use Charitable Trusts
Outright gifts to charity are simple and effective. A charitable trust makes sense when you want something more: an income stream from appreciated assets, a way to diversify a concentrated stock position or sell a business without an immediate capital gains hit, a structured gift that benefits children as well as charity, or a way to reduce the Washington estate tax. A charitable trust is irrevocable, so it should be used for assets you are prepared to commit permanently.
Charitable Remainder Trusts Under IRC § 664
A charitable remainder trust pays an income stream to you or other noncharitable beneficiaries for life or a term of years, and at the end of the term the remaining assets pass to one or more charities. Because the trust itself is generally exempt from income tax, it can sell appreciated assets without paying federal capital gains tax at the trust level; instead, the gain is carried out to the income beneficiaries over time as they receive payments under the tier rules of § 664.
The basic federal requirements are:
- The annual payout must be at least 5 percent and no more than 50 percent of the trust’s value (for a unitrust) or initial value (for an annuity trust).
- The value of the charitable remainder, calculated at creation, must be at least 10 percent of the initial fair market value of the property contributed.
- The term must be the life or lives of the individual beneficiaries, or a term of no more than 20 years.
- You receive a federal income tax charitable deduction in the year of funding for the present value of the remainder interest, subject to percentage limitations.
Charitable remainder annuity trusts (CRATs)
A CRAT pays a fixed dollar amount each year, set when the trust is created. No additional contributions are permitted. A CRAT suits donors who want predictable payments, but inflation erodes the payment over time, and a CRAT must also satisfy the IRS requirement that the probability of exhausting the trust before the remainder passes to charity is not too high.
Charitable remainder unitrusts (CRUTs)
A CRUT pays a fixed percentage of the trust’s value, revalued annually. Payments rise if the investments grow. Additional contributions are permitted.
Flip CRUTs
A flip CRUT starts as a net-income unitrust, paying the lesser of trust income or the unitrust amount, and then “flips” to a standard unitrust upon a triggering event, such as the sale of a hard-to-sell asset like real estate or closely held stock. Flip CRUTs are common when the donor wants to contribute Washington real property that produces little income until it is sold.
Charitable Lead Trusts: CLATs and CLUTs
A charitable lead trust is the mirror image of a remainder trust. The charity receives payments first, for a term of years or for a life, and the remaining assets then pass to noncharitable beneficiaries, usually children or grandchildren.
- A charitable lead annuity trust (CLAT) pays charity a fixed annuity each year.
- A charitable lead unitrust (CLUT) pays charity a fixed percentage of the trust’s annually revalued assets.
Lead trusts are most often used for transfer tax planning. The value of the gift to the family is reduced by the value of the charity’s lead interest. When trust investments outperform the IRS assumed rate, the excess passes to the family with little or no transfer tax. A lead trust can be structured as a grantor trust, which provides an up-front income tax deduction but taxes the donor on trust income, or as a nongrantor trust, which provides no up-front deduction but allows the trust to deduct its charitable payments.
A testamentary CLAT created at death can also reduce Washington estate tax, because the charitable lead interest qualifies for the estate tax charitable deduction.
Washington Estate Tax and Charitable Trust Planning
Washington’s estate tax exclusion is $3,000,000 for deaths from July 1, 2026 through December 31, 2026, with rates from 10 to 20 percent on amounts above the exclusion and indexing scheduled to begin in 2027. Washington does not allow portability between spouses. The Washington tax generally follows the federal estate tax charitable deduction under IRC § 2055, so property passing to charity at death, including the value of a charitable remainder or lead interest, reduces the Washington taxable estate.
Several Washington-focused strategies follow from this:
- Charitable bequests of retirement accounts: naming charity as beneficiary of an IRA or 401(k) removes the account from the Washington taxable estate and avoids income tax that would otherwise be paid by individual heirs.
- Testamentary CRTs: a trust created at death can pay a surviving family member income for life or a term of years, with the remainder to charity, reducing the Washington estate while still benefiting family.
- Lifetime CRTs: because Washington has no gift tax, assets contributed during life are generally removed from the Washington gross estate, subject to the value of any retained income interest.
- Coordinating with credit shelter and QTIP trusts: charitable gifts can be timed at the first or second death, and a Washington-only QTIP election under RCW 83.100.047 can be combined with charitable remainder planning.
Capital Gains, Washington’s Excise Tax, and Charitable Trusts
For federal purposes, a charitable remainder trust can sell appreciated assets without immediate tax at the trust level. Washington’s capital gains excise tax under chapter 82.87 RCW is a separate state tax that applies to certain long-term capital gains; real estate is generally excluded, while stock and many business interests may be included. How the state tax applies to a sale by a charitable remainder trust, or to gains distributed from it, should be reviewed before the trust is funded and before the sale is negotiated. Contributions of appreciated assets to charity may also interact with the state tax’s charitable provisions. Holmes Law coordinates with your tax advisor on these points rather than assuming the federal result carries over.
Community Property and Charitable Trusts
Because Washington is a community property state, most married couples’ appreciated assets are community property. A charitable remainder trust funded with community property is normally treated as created by both spouses, and the income interest is commonly structured to pay both spouses for their joint lives and then the survivor.
- Both spouses should sign the trust as donors, with the trust confirming the community character of contributed property.
- If only one spouse is to be a donor or income beneficiary, the property should first be partitioned into that spouse’s separate property by written agreement, since each spouse owns half of the community.
- A surviving spouse’s continuing income interest generally qualifies for the marital deduction, and the charitable remainder for the charitable deduction, when the trust is properly drafted.
- The community property basis adjustment under IRC § 1014(b)(6) does not apply to assets already transferred to a charitable trust, which is one reason timing matters.
Washington’s Charitable Trusts Act
Washington supervises the charitable sector through chapter 11.110 RCW, the Charitable Trusts Act. The Act’s stated purpose is to facilitate public supervision of the administration of charitable trusts.
- Registration and filing: trustees of charitable trusts that are subject to the Act must register with the Secretary of State’s charities program under RCW 11.110.051 and file the trust instrument and related information under RCW 11.110.060. Whether a particular split-interest trust must register depends on the Act’s definitions and exemptions, which should be reviewed when the trust is created and again when the noncharitable interest ends.
- Attorney General oversight: the Attorney General has authority under chapter 11.110 RCW to investigate charitable trusts and to bring proceedings to secure compliance and proper administration.
- Court proceedings: when a charitable trust’s purposes become impossible or impracticable, a Washington court may apply the cy pres doctrine to redirect the gift to a similar charitable purpose. The Attorney General generally must be given notice of proceedings affecting charitable interests, including matters brought under TEDRA, chapter 11.96A RCW.
- Endowments: charitable organizations that hold endowment funds are governed by Washington’s Uniform Prudent Management of Institutional Funds Act, chapter 24.55 RCW.
Funding a Washington Charitable Trust
The assets you contribute shape the trust’s design. Some common Washington situations:
- Publicly traded stock: the simplest asset. Highly appreciated shares with a low basis produce the largest benefit because the trust can sell and diversify without federal tax at the trust level.
- Washington real property: rental houses, land, and commercial property can be contributed, often to a flip CRUT. Mortgaged property is problematic, because debt can cause the trust to lose its tax-exempt status or trigger income to the donor, and should be addressed before transfer. A prearranged sale must be avoided; if the trust is legally bound to sell to a buyer before the contribution, the IRS may tax the gain to the donor.
- Closely held business interests: C corporation stock and LLC interests can work with careful planning. S corporation stock generally cannot be held by a charitable remainder trust without terminating the S election, so a different structure is usually needed.
- Retirement accounts at death: naming a charitable remainder trust as beneficiary of an IRA can provide a life income stream to a child or other beneficiary, as a partial substitute for the stretch payout that the SECURE Act eliminated for most beneficiaries, while removing the account from the Washington taxable estate.
Serving as Trustee of a Charitable Trust
Donors often serve as trustee of their own charitable remainder trust, but it comes with responsibilities. Charitable remainder trusts are subject to many of the private foundation rules, including the prohibition on self-dealing under IRC § 4941, which bars most transactions between the trust and the donor or family members, such as buying trust assets or borrowing from the trust. The trustee must value unitrust assets annually, file the annual federal split-interest trust return, and make payments on time. For hard-to-value assets, an independent trustee or special independent trustee is often used for valuation. A trustee who fails to meet these requirements can jeopardize the trust’s tax status and the donor’s deduction.
Alternatives: Donor-Advised Funds and Private Foundations
A charitable trust is not the only structure. A donor-advised fund at a community foundation or national sponsor offers simplicity and an immediate deduction, but provides no income stream. A private foundation offers maximum control and a family legacy, but carries excise taxes, payout requirements, and administrative cost. Many Washington families use a CRT to provide income and name their donor-advised fund or foundation as the remainder beneficiary. The right choice depends on your income needs, the assets involved, and how much control you want over future grants.
Frequently Asked Questions
What is the difference between a charitable remainder trust and a charitable lead trust?
A remainder trust pays you or your family first and charity at the end. A lead trust pays charity first and your family at the end.
How much can a Washington charitable remainder trust pay me?
Under IRC § 664, the payout must be between 5 and 50 percent annually, and the charitable remainder must be worth at least 10 percent of the initial contribution.
Does a charitable trust reduce Washington estate tax?
Yes. Charitable interests qualify for the estate tax charitable deduction, which reduces the Washington taxable estate, and lifetime transfers can remove assets from the gross estate because Washington has no gift tax.
Can I put my Washington rental property into a charitable remainder trust?
Yes, and a flip CRUT is often used for real property. Mortgaged property raises special issues and should be reviewed carefully before transfer.
Does my charitable trust have to register with the state?
Possibly. Chapter 11.110 RCW requires registration of many charitable trusts with the Secretary of State, and the Attorney General has oversight authority. Whether a given trust must register depends on its terms.
Can my spouse and I create a charitable remainder trust together?
Yes. Community property is commonly contributed by both spouses, with payments for their joint lives.
Speak With a Washington Charitable Trust Attorney
Charitable trusts combine philanthropy with income, capital gains, and Washington estate tax planning. Michael Holmes helps Washington donors design charitable remainder and lead trusts and coordinate them with wills, revocable trusts, and community property planning, working remotely with clients across the state. Contact Holmes Law about a Washington charitable trust, or explore related WA irrevocable trusts.