All About Estates

Charitable Remainder Trusts in Canada

The Charitable Remainder Trust (CRT) is a gift planning structure that rarely works in Canada.  An import from the U.S. – where it is an integral part of the gift and estate tax regime – the CRT in Canada has fewer tax and planning benefits.  It’s a foreign plant that doesn’t thrive in the Canadian soil.

CRTs in the U.S.

Introduced in 1969, U.S. CRTs are a defined structure in the Internal Revenue Code and there are a number of variants.  In very simple terms, the U.S. CRT is a tax-exempt inter vivos trust that enables the settlor (donor) to make an irrevocable gift of property, receive annual payments from the trust for life or a term, and name one or more charities as the remainder beneficiary.

The present value of the remainder interest of the trust – a discounted amount typically based on life expectancy of the income beneficiary — is the gift for tax purposes.  The cherry on top is that donations of appreciated property to fund a U.S. CRT are exempt from capital gains tax.  As most U.S. bequests (gifts by will) produce no tax benefits to the estate, the CRT is a tax-effective alternative.

CRTs in Canada

The Canadian CRT is a different beast.  It has the following features:

  • Income-only trust with no capital encroachment. Trust expenses are paid from income.  In a low-yield environment the income (life) beneficiary is penalized, unlike the U.S. total return trust.  The cost and bother of a CRT are often not worth the meager income.
  • The CRT produces a donation receipt at inception equal to the present value of the remainder interest, which is the gift portion. Depending on the age of the income beneficiary, this discount can be significant.
  • There is a disposition for tax purposes when the CRT is funded with appreciated property, including public securities. By contrast, a direct gift of public securities to charity is exempt from capital gains tax.
  • Capital gains within the CRT is taxable. Some Canadian lawyers draft CRTs to assign gains in the trust to the capital beneficiary, which is a tax-exempt charity.  CRA has not publicly endorsed this approach.
  • Additional capital contributions to the trust are not eligible for a donation tax receipt. Why? Because CRA has taken the position that the charitable gift is the remainder of the trust, not the property contributed.
  • Few Canadian charities have experience with CRTs, so they are often more complex to set up, value and track.
  • CRTs are irrevocable. They cannot be unwound.

To top it off, unlike the U.S., Canada has no estate taxes, but it does have generous tax incentive for estate donations.  A gift by will can be claimed against up to 100% of net income in the final two lifetime returns and up to 75% of net income in up to 5 estate returns.  These limits provide greater tax savings than the U.S.

Some Benefits

There are, of course, still good reasons to use a CRT.  These include privacy, avoiding dependent claims, and handling assets like real estate or private shares.   And there has been some creative ways of combining CRTs with Canadian structures like Alter-ego or Joint-Spousal Trusts to improve tax efficiency.  But, on balance, CRTs in Canada have more drawbacks than benefits.  We have better ways to support charities in an estate plan.

About Malcolm Burrows
Malcolm is a philanthropic advisor with over 30 years of experience. He is head, philanthropic advisory services at Scotia Wealth Management and founder of Aqueduct Foundation. Views are his own.


  1. Yolanda Benoit

    January 30, 2020 - 2:31 pm

    Thank you for sharing your expertise, Malcolm. It is very interesting and enlightening to see how the U.S. CRT and the Canadian CRT compare to one another.

  2. Jeanne Turner

    September 5, 2023 - 5:44 pm

    What do you mean by this comment in your article.

    But, on balance, CRTs in Canada have more drawbacks than benefits. We have better ways to support charities in an estate plan.

    • Malcolm Burrows

      September 5, 2023 - 5:57 pm

      Hi Jeanne – the more common way to donate to charity at death in Canada are 1) gift by will; 2) direct designation gift of RRSP or RRIF plan assets; 3) direct designation gift of life insurance. All of these donations collectively known as “estate donations”. These donations can be claimed again 100% of annual net income in the final two lifetime tax returns plus up to 75% in up to five years of estate returns. This is much more tax-effective than similar gifts in the US – and avoids the complexities and limitations of the CRT in Canada. The two regime are very different and the CRT is a “non-native plant” in Canada. Hope this helps. Malcolm

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.