Charitable Remainder Unitrusts in New York: How They Work, NY and NYC Tax Treatment, and Attorney General Compliance

By Albert Goodwin, Esq., New York estate planning and trust attorney. Last reviewed for the 2025 tax year. Dollar thresholds below are indexed each year; confirm the current figures before relying on them.

Most articles about charitable remainder unitrusts explain the federal rules and stop there. For a New York resident, that leaves out a large part of the tax bill. New York State and New York City tax capital gains as ordinary income, at combined rates that can exceed 13%. New York limits charitable deductions for high-income taxpayers. New York requires charitable trusts to register with the Attorney General. And New York has an estate tax with a cliff that a charitable remainder can help you stay under. This guide covers the federal framework and then applies it to a New York owner of appreciated property, with a worked Manhattan example and a checklist of New York compliance steps.

For charitable gifts made through a will rather than a lifetime trust, see our page on charitable bequests in a New York will. For other lifetime strategies, see advanced New York estate planning techniques.

What a Charitable Remainder Unitrust Is

A charitable remainder unitrust (CRUT) is an irrevocable, tax-exempt trust defined in Internal Revenue Code § 664(d)(2). Each year the trust pays one or more non-charitable beneficiaries a fixed percentage of the trust's net fair market value, revalued annually. The percentage must be at least 5% and no more than 50%. Payments run for the life or lives of the beneficiaries, or for a fixed term of up to 20 years. When the payments end, whatever remains passes to one or more charities described in IRC § 170(c). The present value of the charitable remainder, computed under IRC § 7520 at the time of funding, must be at least 10% of the value contributed.

The grantor is usually the income beneficiary, alone or with a spouse. The grantor can add property to a CRUT after it is created, which is not permitted with a charitable remainder annuity trust. The grantor can also reserve the right to change the charitable remainder beneficiary, as long as every possible recipient is a § 170(c) organization.

Because the trust itself is exempt from income tax under IRC § 664(c), it can sell appreciated property without paying tax on the gain. The gain is not forgiven. It is carried inside the trust and taxed to the income beneficiary as it is distributed, under the four-tier rules discussed below.

Why New York Changes the Math

A CRUT is attractive anywhere, but the case for one is stronger in New York because the tax on an outright sale is higher here. The following New York rules are missing from most national explainers.

• No preferential capital gains rate. New York State and New York City tax long-term capital gains at the same rates as wages. For 2025, a single New York resident pays 6.85% on taxable income from $215,400 to $1,077,550, 9.65% from there to $5 million, 10.3% from $5 million to $25 million, and 10.9% above that. Married joint filers reach the 6.85% bracket at $323,200 and the 9.65% bracket at $2,155,350. New York City adds up to 3.876%. New York's tax benefit recapture also pushes high-income filers toward a flat rate on all income once they cross the $1,077,550 threshold.
• Nonresidents pay New York tax on New York real estate. Under N.Y. Tax Law § 631, gain from the sale of real property located in New York is New York source income even if the seller lives in Florida or New Jersey. A nonresident selling a Manhattan apartment outright pays New York tax on the gain and usually prepays it at closing on Form IT-2663. If a CRUT sells the property instead, the exempt trust is the seller.
• New York limits charitable deductions for high earners. Under N.Y. Tax Law § 615(f) and (g), a taxpayer with New York adjusted gross income over $1 million may deduct only 50% of federal charitable contributions on the New York return, and only 25% if income exceeds $10 million. New York City follows the State computation. The federal deduction is not affected.
• The trust pays no New York fiduciary income tax on its gains. New York's fiduciary income tax starts from federal taxable income, and a trust exempt under IRC § 664(c) has none. The income beneficiary reports the distributions on the New York return with the same character they had at the trust level.
• Transfer taxes are not avoided. A conveyance to a trust without consideration is generally exempt from New York State real estate transfer tax under N.Y. Tax Law § 1405(b)(4), and the New York City real property transfer tax has a parallel exemption. When the trustee later sells, the trust pays State transfer tax (0.4%, or 0.65% on New York City residential sales of $3 million or more) and the City RPTT (1% up to $500,000, 1.425% above that for residential property) like any other seller.
• The New York estate tax cliff. New York's 2025 basic exclusion amount is $7,160,000. An estate that exceeds the exclusion by more than 5% (about $7,518,000) loses the exclusion entirely and pays tax on the full estate at rates up to 16%. A charitable remainder is deductible under N.Y. Tax Law § 955, which incorporates IRC § 2055, so a CRUT can reduce a taxable estate that would otherwise fall off the cliff.
• Attorney General supervision. New York treats a charitable remainder trust as a charitable trust subject to the Attorney General's Charities Bureau under EPTL 8-1.4. Registration is covered in detail below.

2025 Figures That Drive the Calculation

The § 7520 rate matters less for a unitrust than for an annuity trust, because the unitrust payout floats with trust value. It still affects the remainder factor and the 10% test, and in a high-rate month the deduction is modestly larger.

Worked Example: A Manhattan Investment Condominium

Assume Elena, age 70, single, a New York City resident, owns a condominium on the Upper West Side that she bought in 2001 for $700,000 and has rented out ever since. She has taken $350,000 of depreciation, so her adjusted basis is $350,000. The unit is worth $2,600,000 and carries no mortgage. Her other taxable income is $300,000 a year. Selling costs are ignored to keep the comparison clear.

Option 1: Sell outright

Option 2: Contribute the condominium to a 5% CRUT, then the trustee sells

Two points in this example are often glossed over. First, the $857,000 is deferred, not erased. Each $130,000 payment carries out gain under the four-tier rules and is taxed to Elena when she receives it. The benefit is that the full $2,600,000 is working for her in the meantime, and the payments are spread across years in which she may be in a lower bracket. Second, the 30% of AGI ceiling means Elena can use only about $774,000 of a $1.1 million deduction over six years. The unused balance expires. A donor with a large deduction and moderate income may want to coordinate the gift with other income events, or accept that part of the deduction will not be used.

If Elena were a Florida resident who still owned the Manhattan condominium, the outright sale would carry New York State tax on the gain under Tax Law § 631 even though she lives out of state, but no City tax. Whether later CRUT distributions to a nonresident beneficiary carry New York source character is fact-specific and should be reviewed before funding.

The Charitable Deduction on Your New York Return

The federal deduction equals the present value of the charitable remainder, computed under Treas. Reg. § 1.664-4 using the IRS actuarial tables in Publication 1458 and the § 7520 rate. The deduction is reported on Form 8283 with a qualified appraisal attached when real estate is contributed.

New York starts with the federal itemized deductions and then applies its own limits. If your New York AGI is under $1 million, the charitable deduction flows through in full to the State and City returns. Between $1 million and $10 million, only 50% of charitable contributions are allowed; above $10 million, 25%. In the example above, Elena's AGI stays under $1 million because the trust, not Elena, sold the condominium, so she keeps the full State and City deduction. Had she sold outright in the same year she made a charitable gift, her AGI would have exceeded $1 million and half the New York deduction would have been lost.

How CRUT Distributions Are Taxed to a New York Beneficiary

Each payment is characterized under IRC § 664(b) and Treas. Reg. § 1.664-1(d) in a fixed order, and the beneficiary reports it on Schedule K-1 (Form 5227):

1. Ordinary income: interest, non-qualified dividends and rent earned by the trust in the current year and accumulated from prior years, with qualified dividends coming out after other ordinary income.
2. Capital gain: current and accumulated gains, highest-taxed first. In the example, the $350,000 of 25% unrecaptured § 1250 gain is distributed before the 20% long-term gain.
3. Other income: tax-exempt income such as municipal bond interest.
4. Return of principal: tax-free.

New York accepts the federal character for the beneficiary's return but, because the State and City have no preferential capital gains rate, tiers 1 and 2 are taxed the same way. Tax-exempt interest from New York municipal bonds in tier 3 remains exempt from State and City tax; interest from other states' bonds is added back under Tax Law § 612(b)(1).

The Four Kinds of Unitrust

Treasury regulations permit four payout formats. The choice depends on what you contribute and when you want income.

Standard (fixed-percentage) unitrust

The trust pays the stated percentage of the annual value every year, whether or not the trust earned that much. If the trust earns less, principal is invaded. This is the right format for cash or marketable securities.

Net income unitrust (NICRUT)

The trust pays the lesser of the stated percentage or the trust's actual net income for the year. If a NICRUT with a 5% payout holds $2,600,000 but earns only $60,000 of net income, the beneficiary receives $60,000, not $130,000. Shortfalls are never made up. This protects principal and suits a beneficiary who wants to defer income.

Net income unitrust with make-up (NIMCRUT)

Same as a NICRUT, except that shortfalls accumulate in a make-up account. In a later year when net income exceeds the stated percentage, the excess is paid out until the deficit is cleared. Using the figures above, a $70,000 shortfall in year one could be made up in a later year when the trust earns $200,000. What counts as "income" for this purpose is defined by the trust instrument and state law. New York's Uniform Principal and Income Act (EPTL Article 11-A) allows a trust instrument to specify whether post-contribution capital gain is treated as income, which is what makes a NIMCRUT useful for controlling the timing of distributions.

Flip unitrust

A flip CRUT begins as a NICRUT or NIMCRUT and converts to a standard unitrust on January 1 following a triggering event described in Treas. Reg. § 1.664-3(a)(1)(i)(c). The trigger must be outside the control of the trustee or any other person: the sale of an unmarketable asset, a date, a beneficiary reaching a stated age, marriage, divorce, death, or birth. The flip format exists for exactly the situation most New York donors face, which is contributing a single piece of real estate that produces little or no income until it is sold.

A flip CRUT works well for a Brooklyn brownstone held as a rental or a Manhattan condominium. A cooperative apartment is harder. Co-op shares and the proprietary lease are personal property, and the transfer to the trust needs board approval. Many boards refuse transfers to irrevocable trusts, or allow them only with a personal guaranty and an occupant who will live in the unit. Neither solution works for a CRUT, because the grantor cannot live in or use trust property after the contribution without committing an act of self-dealing under IRC § 4941. The practical answer for a co-op is usually one of the following: contribute the shares close to a sale that has been listed but not contracted, obtain written board consent to the trust's ownership for the period until closing, or sell the co-op outright and contribute other appreciated assets instead. We discuss ownership structures for high-value apartments on our page about luxury apartment and penthouse transactions in NYC.

When a CRUT holds real estate or other unmarketable assets, Treas. Reg. § 1.664-1(a)(7) requires that the annual valuation be made either by an independent trustee or by a qualified appraisal. A grantor who serves as sole trustee will need a new appraisal each year the property remains in the trust.

CRUT Compared With a Charitable Remainder Annuity Trust

CRUT Compared With a Donor-Advised Fund or an Outright Gift

These are not mutually exclusive. A donor-advised fund can be named as the remainder beneficiary of a CRUT, which lets the family decide later which charities receive the remainder without amending the trust.

Pitfalls That Disqualify or Burden a New York CRUT

• Prearranged sale. If the property is already under a binding contract when it is transferred to the trust, the IRS treats the grantor as the seller under the assignment-of-income doctrine, and the gain is taxed to the grantor. See Rev. Rul. 78-197, Ferguson v. Commissioner, 174 F.3d 997 (9th Cir. 1999), and Rauenhorst v. Commissioner, 119 T.C. 157 (2002). A listing, a broker, and even an accepted offer that is not yet a signed contract have generally been permitted; a signed contract of sale has not. In New York residential practice, that means the deed to the trustee must be recorded before the contract is signed.
• Mortgaged property. Contributing encumbered property is a bargain sale under IRC § 1011(b) that triggers gain to the grantor, and rental income from debt-financed property is unrelated business taxable income under IRC § 514. Since 2007, a CRT pays a 100% excise tax on its UBTI under IRC § 664(c)(2). If the grantor remains personally liable and the trust pays the mortgage, that is self-dealing. Pay off the mortgage before funding.
• Grantor use after contribution. Living in the property, using a vacation home, or storing belongings there after the deed is delivered is self-dealing under IRC § 4941, applied to split-interest trusts by IRC § 4947(a)(2) and incorporated into New York law by EPTL 8-1.8.
• Primary residence and the § 121 exclusion. A CRUT is not a grantor trust, so the $250,000/$500,000 home sale exclusion is unavailable for a sale by the trust. A homeowner can keep the exclusion by selling an undivided fractional interest personally and contributing the balance, which is permitted under IRC § 170(f)(3)(B)(ii).
• S corporation stock. A charitable remainder trust is not an eligible S corporation shareholder (Rev. Rul. 92-48). Contributing S stock terminates the election.
• Tangible personal property. Art, jewelry or a collection contributed to a CRUT produces no deduction until the trust sells the item (IRC § 170(a)(3)), and the deduction is then limited to basis because the use is unrelated to the charity's purpose.
• Young beneficiaries and two-life trusts. A lifetime payout to a beneficiary in their twenties or thirties, or a two-life trust for a younger couple, often fails the 10% remainder test at any payout above the 5% minimum. A term of up to 20 years is the alternative.
• Gifts of the income interest. Naming a child or other third person as income beneficiary is a taxable gift of the present value of that interest, reported on Form 709. New York has no gift tax, but gifts made within three years of death are added back to the New York gross estate under Tax Law § 954(a)(3) under current law.

New York Compliance: What the Trustee Must Do

Register with the Attorney General's Charities Bureau

EPTL 8-1.4 gives the New York Attorney General supervisory authority over trustees holding property for charitable purposes, and the Charities Bureau treats a charitable remainder trust as a trust that must register. Registration is currently made on Form CHAR001-RT with a copy of the trust instrument. While the non-charitable payments continue, the Bureau generally does not require annual financial reports; reporting obligations begin when the charitable remainder becomes possessory, and the trustee must account to the charity and the Attorney General at termination. The Bureau updates its forms and online filing procedures periodically, so the trustee should confirm the current requirements at the time of funding. Our page on whether trusts are registered in New York explains how charitable trusts differ from private trusts on this point.

EPTL 8-1.8: private foundation rules written into the trust

EPTL 8-1.8 provides that a trust subject to IRC § 4947(a)(2) is deemed to contain provisions prohibiting self-dealing (§ 4941) and, where applicable, excess business holdings (§ 4943), jeopardizing investments (§ 4944) and taxable expenditures (§ 4945), and it permits the trustee to amend the instrument to comply with those sections without a court order. The statute protects the trust's tax status, but it also means a New York trustee who permits the grantor to use trust property is in breach of both federal and state law.

The Attorney General as a necessary party

Under EPTL 8-1.1(f), the Attorney General represents the charitable beneficiaries and must be made a party to any court proceeding affecting a charitable disposition. That includes a trustee's accounting, a petition to reform a defective CRUT, a proceeding to remove a trustee, and any application to change the charitable beneficiary that the instrument does not already authorize.

Prudent Investor Act duties

A CRUT trustee is subject to the New York Prudent Investor Act, EPTL 11-2.3. The trustee must diversify unless it is prudent not to, consider the needs of both the income beneficiary and the charitable remainder, and document the investment strategy. Holding a single piece of real estate for years inside a NIMCRUT is defensible only if the instrument and the record show why. If the trustee is the grantor, the independent-valuation and self-dealing rules above also apply. Many New York grantors appoint a corporate trustee or a co-trustee for this reason; see using a bank as trustee.

Accountings, jurisdiction, and reformation

The Surrogate's Court has jurisdiction over lifetime trusts under SCPA 207, and the Supreme Court has concurrent jurisdiction. An income beneficiary, the charity, or the Attorney General can compel a trustee to account under SCPA 2205. A CRUT that fails IRC § 664 at inception produces no deduction and is not exempt. IRC § 2055(e)(3) permits a qualified reformation of a testamentary charitable remainder trust if a judicial proceeding is commenced within 90 days after the due date of the estate tax return, and IRC § 2522(c)(4) provides a parallel rule for lifetime trusts. In New York the reformation petition is brought in Surrogate's Court or Supreme Court with the Attorney General cited as a party. Trustees who have already made errors should review our pages on trust accountings and breach of fiduciary duty.

New York estate tax at the grantor's death

If the grantor is the sole income beneficiary for life, the trust is included in the federal and New York gross estate under IRC § 2036 and fully offset by the charitable deduction, so it adds nothing to the taxable estate. If a surviving spouse is the successor income beneficiary, the spouse's interest qualifies for the marital deduction under IRC § 2056(b)(8). If a child or other person is the successor beneficiary, the present value of that person's interest is taxable and counts toward the $7,160,000 New York exclusion and the cliff. Grantors near the cliff should model this before naming a non-spouse successor.

Replacing the Gift for Your Family: CRUT Plus an Irrevocable Life Insurance Trust

The remainder goes to charity, not to the grantor's children. Grantors who want to replace that value often pair the CRUT with an irrevocable life insurance trust. Part of each unitrust payment funds premiums on a policy owned by the ILIT. The proceeds pass to the children outside the grantor's estate, provided the ILIT owns the policy from the start or the grantor survives the three-year period in IRC § 2035, which New York follows. The insurance does not need to equal the full value of the CRUT; it should be sized to the after-tax amount the children would have inherited had the property been sold and held until death. This combination is one of the strategies covered on our advanced estate planning page.

CRUTs and Retirement Accounts

Two newer uses deserve mention for New York clients.

• CRUT as IRA beneficiary. Since the SECURE Act, most non-spouse beneficiaries must empty an inherited IRA within ten years. Naming a CRUT as beneficiary lets the IRA pay into the exempt trust without immediate income tax, and the trust then pays a child for life or for up to 20 years. The charitable remainder is deductible on the federal and New York estate tax returns.
• One-time qualified charitable distribution to a CRUT. IRC § 408(d)(8)(F) allows an IRA owner age 70½ or older to make a single-year election to fund a CRUT with up to $54,000 (2025, indexed) directly from the IRA. The CRUT must be funded only with QCDs, the income beneficiaries are limited to the owner and spouse, and payments are taxed as ordinary income.

Requirements Checklist for a New York CRUT

1. Trust instrument that tracks IRC § 664(d)(2) and the IRS sample forms in Rev. Proc. 2005-52 through 2005-59, with New York governing-law and EPTL 8-1.8 language.
2. Payout rate between 5% and 50%, and a term of lives or no more than 20 years.
3. Remainder value of at least 10% of the contribution, tested with the § 7520 rate for the funding month or one of the two prior months.
4. Charitable remainder beneficiaries limited to IRC § 170(c) organizations, with an alternate named in case a charity ceases to exist.
5. No binding sale contract before the deed or assignment to the trustee is delivered.
6. No mortgage, S corporation stock, or property the grantor will keep using.
7. Qualified appraisal and Form 8283 for the income tax return; Form 709 if a third person receives the income interest.
8. Trustee obtains an EIN, files Form 5227 annually, and issues Schedule K-1 to each beneficiary.
9. Registration with the New York Attorney General's Charities Bureau under EPTL 8-1.4.
10. Annual valuation, with an independent trustee or qualified appraisal for unmarketable assets.
11. Investment policy that satisfies EPTL 11-2.3 and documents the trustee's reasoning.
12. Coordination with the grantor's will or revocable living trust, any ILIT, and the New York estate tax projection.

Frequently Asked Questions

Does a New York charitable remainder unitrust have to register with the Attorney General?

Yes. EPTL 8-1.4 brings charitable remainder trusts under the Charities Bureau's supervision, and the trustee registers after the trust is funded. Annual financial reporting is generally deferred until the charitable interest becomes possessory, but the trustee must notify the Bureau and account when the non-charitable interest ends.

Can I put my New York City apartment in a CRUT?

A condominium or a townhouse, yes, provided it is unmortgaged and you do not continue to use it. A cooperative apartment is possible only with board consent to the trust holding the shares, and most boards will not permit an irrevocable trust to hold a unit that no one occupies. A primary residence also raises the IRC § 121 issue discussed above.

Will I avoid New York State and City tax on the sale?

The trust pays no tax when it sells. You pay State and City tax on the capital gain portion of each unitrust payment as you receive it, at ordinary rates, because New York has no preferential capital gains rate. The benefit is deferral, spreading, and the ability to invest the full pre-tax proceeds.

How large is the charitable deduction?

It is the present value of the remainder, typically between 30% and 60% of the contribution for a lifetime trust, lower for younger beneficiaries and higher payout rates. For appreciated real estate given to a public charity, you may deduct up to 30% of AGI each year for six years. If your New York AGI exceeds $1 million, only half of the deduction counts on your New York return.

Can I be the trustee of my own CRUT?

Yes, but if the trust holds real estate or other unmarketable assets you must obtain a qualified appraisal each year, and you remain a disqualified person for self-dealing purposes. Many New York grantors serve as trustee only until the property is sold and then appoint a corporate trustee to manage the investments.

Can I change the charity later?

Only if the trust instrument reserves that power to you and limits substitutes to IRC § 170(c) organizations. Naming a donor-advised fund as the remainder beneficiary gives the family the same flexibility without a trust amendment.

Does a CRUT avoid probate in New York?

Property in a funded lifetime CRUT is not part of the probate estate. The trust continues under its own terms after your death, and the trustee rather than the executor deals with the charity and the Attorney General. See our page on avoiding probate in New York for the broader picture.

What happens if I die shortly after funding the trust?

If you are the sole income beneficiary, the entire trust passes to charity, and your estate takes a full charitable deduction. Nothing goes to your family from the trust itself. That is the reason for pairing a CRUT with life insurance held in an ILIT, or for naming a spouse or child as a successor income beneficiary and accepting the gift and estate tax consequences described above.

Related New York Trust and Charitable Planning Pages

• Leaving property to charity in a New York will
• Advanced New York estate planning techniques
• New York trust attorney: types of trusts and how they are used
• Beneficiaries' rights to trust information in New York
• How to avoid probate in New York

Talk to a New York Trust Attorney About a CRUT

A charitable remainder unitrust makes sense for a New York owner of appreciated real estate or stock who wants income, a current deduction, and a gift to charity, and who can accept that the asset will not pass to the family. Getting it wrong is expensive: a prearranged sale, a mortgage, or a missed registration can cost the deduction and the exemption. The Law Offices of Albert Goodwin drafts and funds charitable remainder trusts for clients in Manhattan, Brooklyn, Queens and across New York State, and represents trustees and beneficiaries in CRUT accountings and reformation proceedings. Call 212-233-1233 or email [email protected] to schedule a consultation.