Charitable Remainder Trusts for Concentrated Stock

Start With the Charitable Goal and the Assets You Can Commit

For a Walmart executive, the candidate assets may be long-held shares in a taxable account with substantial unrealized appreciation. This article addresses that situation, not unvested awards or stock still inside a retirement plan.

Before discussing trust terms, identify:

• The charitable purpose and how much wealth you are willing to dedicate to it.
• The payments the household needs and how much variability it can tolerate.
• Assets that must remain available for emergencies, family goals, or heirs.
• The stock lots, adjusted basis, ownership, and applicable transfer restrictions.

Do not put money needed for a home purchase, a tax reserve, or another near-term commitment into the trust merely because the tax illustration is appealing. A scheduled trust payment is not equivalent to unrestricted access to the entire portfolio.

The trust also should not be the only source of a household’s flexibility. Keep a clear distinction between assets committed to the CRT and assets still available outside it.

Choose the Payment Structure Before Evaluating the Tax Illustration

Two common forms use different payment formulas:

The statutory payout range is generally 5% to 50%, with payments for qualifying lives or a term no longer than 20 years. The actuarial charitable remainder must meet a 10% minimum-value test. Those are qualification boundaries, not recommendations to choose a high payout. 2

Special unitrust variations have different payment mechanics. Have counsel explain the actual document you are considering rather than assuming every CRUT behaves like the standard version in this article.

Model lower investment returns, fees, inflation, and changes in annual distributions. A structure that works only under optimistic assumptions does not provide a dependable foundation for the household plan.

Understand the Tax Sequence: Funding, Sale, and Payments

The Trust Does Not Receive a New Market-Value Basis

A lifetime transfer generally carries the donor’s basis into the CRT. The built-in gain remains part of the tax records. The IRS specifically cautions against treating the transfer as a basis reset. 1

A qualifying CRT is generally exempt from federal income tax, allowing a stock sale inside the trust without the same immediate federal income-tax payment a personal sale would create. Unrelated business taxable income is subject to a separate excise tax, so the exemption is not universal. 2

The sale proceeds belong to the trust. They can support its investment and payment obligations; they are not unrestricted personal cash.

Beneficiary Payments Can Carry the Gain Out Over Time

Distributions follow tax-character ordering rules: ordinary income first, then capital gains, then other income, and finally principal, taking current and accumulated amounts into account. 3

A stock sale’s gain can therefore remain in the trust’s records and affect later beneficiary payments. Calling a payout “income” does not make it all ordinary income, and calling it a “return of principal” does not control its tax treatment.

Amounts distributed to beneficiaries may also enter the net investment income tax calculation under the CRT rules. 4 The tax projection needs to model the expected character of payments alongside other household income.

The benefit may involve deferring when gain reaches the beneficiary. It is not a promise that all gain disappears or that every payment is tax free.

A 5% Payout Is a Formula, Not a Guaranteed Return

Assume a properly designed standard CRUT receives $1 million of long-term Walmart stock with a $200,000 basis. It sells the stock for $1 million, ignoring fees and price changes, producing $800,000 of gain in the trust’s tax records.

Assume a 5% payout formula and that the stated annual valuation is $1 million for a full payment year. The payment calculation is $50,000. Different annual values produce different payments:

These are separate valuation scenarios, not a sequence of projected returns. Actual payment timing, valuation provisions, and a partial first year can change the calculation.

To illustrate tax character only, suppose a $50,000 distribution is made when the trust has $10,000 of ordinary income available under the ordering rules and sufficient undistributed long-term capital gain. The simplified result is $10,000 of ordinary income and $40,000 of long-term capital gain to the beneficiary, assuming no other classes or adjustments affect the result. 3

That payment is not a $50,000 tax-free withdrawal. Nor does a $50,000 payout establish that the trust earned $50,000: payments can reduce principal if investment results do not support them.

This example assumes qualification; it does not establish that a particular beneficiary, term, or document passes the actuarial tests. It does not calculate a charitable deduction, tax savings, future remainder, or sustainable return. Those require a separate projection.

Calculate the Charitable Interest, Not a Deduction for the Entire Transfer

The potential income-tax deduction reflects the present value of the charitable remainder, not the full stock value contributed. 1 The calculation depends on the trust design, payment terms, applicable beneficiary information, and prescribed actuarial assumptions.

IRS valuation tables and the applicable Section 7520 rate are part of that process. Permitted rate elections may also matter. 5 Have counsel or the tax adviser supply a documented calculation for the actual proposed trust.

Then determine how much is usable on the household’s return. Applicable percentage limits, property rules, and carryovers can change the timing of the deduction. Beginning in 2026, itemizers also face the 0.5% contribution-base floor. 6 The overall limitation on itemized deductions can affect higher-income taxpayers as well. 7

A high-income compensation year may make the question timely, but it does not make the full contribution deductible. Ask for three separate figures: the transferred value, the calculated charitable-interest value, and the deduction expected to be usable this year.

Coordinate the Trust With the Stock and Compensation Calendar

Review the Transfer Before a Sale Is Committed

Have counsel review any proposed, binding, or prearranged sale before funding. Do not assume that inserting a trust after a sale is effectively fixed shifts the gain away from you. For Walmart shares, also verify ownership, transfer restrictions, and any applicable preclearance or trading requirements.

Allow time to establish the trust, open the receiving account, complete the transfer, and confirm the trustee’s authority. A signed draft and an uncompleted stock transfer are not the same thing as a funded trust.

Project Payments Alongside Other Income

Match the proposed payments to salary, bonuses, equity events, DCMP distributions, and retirement withdrawals. Payments beginning during an already high-income period may produce a different result from the one suggested by a standalone trust illustration.

Explore those overlaps in The Liquidity Year. Do not simply add a CRT deduction to another strategy’s tax savings without recalculating the combined return.

Assign the Ongoing Work

A CRT brings continuing administration: valuation, investments, required payments, accounting, annual Form 5227 reporting, and beneficiary tax information. 8

Decide who serves as trustee, who prepares the filings, who manages investments, and what each role costs. Obtain actual estimates rather than assuming administration is negligible.

Trustee powers do not create unrestricted personal access. The trust must operate within its document and applicable rules. Ask counsel to explain permitted decisions, beneficiary rights, and charitable provisions before committing assets.

Compare a CRT With Simpler Ways to Meet the Same Goals

A CRT deserves consideration when charitable intent, a payment objective, and appreciated assets fit together. It can be a poor fit when the household needs unrestricted principal, wants the entire balance to pass to heirs, or cannot justify the cost and complexity.

Compare at least these alternatives:

• Sell some shares, pay the resulting tax, and retain control of the proceeds.
• Make an outright charitable stock gift for the amount you want to give now.
• Retain a defined position while diversifying other assets or scheduling partial sales.
• Use a CRT for only the portion that fits the charitable and payment goals.

Compare after-tax payments, assets remaining outside the trust, fees, downside scenarios, and the amount ultimately intended for charity. The largest deduction is not necessarily the best household outcome.

Low-Basis Walmart Stock: Sell, Give, Hold or Exchange provides the broader stock decision comparison.

Bespoke Private Wealth’s private client work is available by application for officers, owners, and families with complex planning needs. Explore tax planning for Walmart executives, or bring your stock holdings and charitable goals to a conversation.

Common Questions

Sources and Tax Guidance

1. IRS: Charitable Remainder Trusts, irrevocability, carryover basis, and the partial deduction.
2. 26 U.S.C. § 664, trust qualification, payment requirements, exemption, and unrelated-business-income excise tax.
3. 26 CFR § 1.664-1, distribution character and trust operation.
4. 26 CFR § 1.1411-3(d), CRT distributions and net investment income.
5. IRS Actuarial Tables, valuation framework and Section 7520 rates.
6. 26 U.S.C. § 170, charitable deductions, limitations, and the 2026 floor.
7. 26 U.S.C. § 68, overall itemized-deduction limitation.
8. IRS Form 5227 Instructions, annual split-interest trust reporting.

Educational information, not individualized tax, legal, or investment advice. Examples are hypothetical and do not establish trust qualification or predict results. Trust design and funding require advice based on your facts and current law. Bespoke Private Wealth is not affiliated with or endorsed by Walmart.