A split-interest trust is a type of trust that benefits both charitable and noncharitable beneficiaries. Unlike traditional trusts that may only benefit one group, split-interest trusts divide the trust’s income, principal, or both between charitable organizations and individual beneficiaries.
Common types of split-interest trusts include:
- Charitable Remainder Trusts (CRTs): Provide income to noncharitable beneficiaries for a set period, after which the remaining assets go to a charity. CRTs come in two main forms:
- Charitable Remainder Annuity Trust (CRAT): Pays a fixed dollar amount to the noncharitable beneficiaries each year. The payout does not change, even if the trust’s assets grow or shrink.
- Charitable Remainder Unitrust (CRUT): Pays a fixed percentage of the trust’s assets each year. The payout amount can vary depending on the trust’s value, allowing for adjustments based on investment performance.
- Charitable Lead Trusts (CLTs): Provide income to a charity for a specific term, after which the remaining assets go to noncharitable beneficiaries.
- Pooled Income Funds: Combine contributions from multiple donors to provide income to beneficiaries while eventually benefiting charities.
Advantages of split-interest trusts include:
- Potential income and estate tax benefits
- The ability to support charitable causes while still providing for family or other beneficiaries
- Flexible income planning for distributions
Because of their structure, split-interest trusts have specific reporting requirements, including filing Form 5227 to track income allocations and ensure IRS compliance.
What are split-interest trusts, and how do they work?
A split-interest trust is a type of trust that benefits both charitable and noncharitable beneficiaries. Unlike traditional trusts that may only benefit one group, split-interest trusts divide the trust’s income, principal, or both between charitable organizations and individual beneficiaries.
Common types of split-interest trusts include:
Charitable Remainder Trusts (CRTs): Provide income to noncharitable beneficiaries for a set period, after which the remaining assets go to a charity. CRTs come in two main forms:
Charitable Remainder Annuity Trust (CRAT): Pays a fixed dollar amount to the noncharitable beneficiaries each year. The payout does not change, even if the trust’s assets grow or shrink.
Charitable Remainder Unitrust (CRUT): Pays a fixed percentage of the trust’s assets each year. The payout amount can vary depending on the trust’s value, allowing for adjustments based on investment performance.
Charitable Lead Trusts (CLTs): Provide income to a charity for a specific term, after which the remaining assets go to noncharitable beneficiaries.
Pooled Income Funds: Combine contributions from multiple donors to provide income to beneficiaries while eventually benefiting charities.
Advantages of split-interest trusts include:
Potential income and estate tax benefits
The ability to support charitable causes while still providing for family or other beneficiaries
Flexible income planning for distributions
Because of their structure, split-interest trusts have specific reporting requirements, including filing Form 5227 to track income allocations and ensure IRS compliance.
Last modified: November 5, 2025
