Charitable Trusts, CRTs & CLTs in Pennsylvania

Charitable giving through trusts serves two purposes: it benefits organizations you care about, and it can significantly reduce your tax burden. Pennsylvania provides favorable treatment for charitable transfers; most importantly, transfers to qualifying charities are completely exempt from Pennsylvania inheritance tax under 72 P.S. § 9111(c). Combined with federal income and estate tax deductions, charitable trusts can be a powerful planning tool for the right families.

Charitable Remainder Trusts (CRTs)

A CRT provides an income stream to you or your beneficiaries for a term of years or for life, with the remainder passing to a charity. Two common forms:

Charitable Remainder Annuity Trust (CRAT): Pays a fixed dollar amount each year (at least 5% of the initial contribution). The payment doesn’t change regardless of trust performance.

Charitable Remainder Unitrust (CRUT): Pays a fixed percentage of the trust’s annually revalued assets (at least 5%). The payment fluctuates with the trust’s investment performance.

The donor receives a federal income tax deduction for the present value of the charitable remainder interest at the time of the contribution. The trust itself is tax-exempt, so appreciated assets contributed to the CRT can be sold without immediate capital gains tax.

Charitable Lead Trusts (CLTs)

A CLT is the inverse of a CRT: the charity receives income payments for a term of years, and then the remainder passes to non-charitable beneficiaries (typically children or grandchildren). CLTs are primarily a transfer tax tool; the value of the remainder interest passing to family is reduced by the present value of the charitable income stream, potentially reducing estate, gift, and PA inheritance tax.

Pennsylvania-Specific Considerations

Inheritance tax exemption: The charitable portion of any transfer is exempt from PA inheritance tax (§ 9111(c)). With a CRT, the present value of the charitable remainder is exempt. The income interest retained by the individual beneficiaries is taxed at the applicable rate based on their relationship to the decedent .

Cy pres (§ 7740.3): If a charitable trust’s specific purpose becomes unlawful, impracticable, or wasteful, the trust doesn’t fail. Instead, the court applies cy pres ; redirecting the trust to fulfill the settlor ’s charitable intent as nearly as possible. The trust property does not revert to the settlor or their heirs.

Notice to Attorney General: Charitable trusts in Pennsylvania require notice to the Attorney General’s office for certain proceedings, including modification and termination.

Private Foundations vs. Donor-Advised Funds

For families whose charitable giving doesn’t require the income or transfer tax benefits of a CRT or CLT, a donor-advised fund may be simpler and less expensive to administer. Private foundations involve significant regulatory compliance under IRC § 4940 et seq. and annual excise taxes. The right vehicle depends on the amount involved, the desired level of control, and the family’s long-term philanthropic goals.

Statutory content on this page was last verified against Pennsylvania statutes (20 Pa.C.S.; 72 P.S. Art. XXI): February 2026 . If you are reading this significantly after that date, confirm key provisions with current statute text or contact our office.