Who Manages the Money in a Charitable Remainder Trust?

Trustee Selection Assessment Tool

Assess Your Potential Trustee

Answer these questions to evaluate if your chosen trustee meets the essential requirements for managing your charitable remainder trust.

Does the trustee have experience managing charitable remainder trusts? Recommended

✓ A trustee with specialized experience understands the unique requirements of CRTs, including IRS Form 5227 filings and payout calculations.

✗ Without specific CRT experience, the trustee may miss critical requirements that could invalidate tax benefits or cause penalties.

Is the trustee's fee structure clearly defined in writing? Important

✓ Clear fee terms (1-1.5% of assets or flat fee) prevent misunderstandings and protect your trust's financial health.

✗ Unwritten or vague fees may lead to unexpected costs that erode your trust's value over time.

Does the trustee have a documented contingency plan? Critical

✓ A contingency plan ensures your trust continues smoothly if the trustee resigns, dies, or their institution is acquired.

✗ Without a plan, the court may appoint a trustee, causing delays and potential loss of tax benefits.

Can the trustee provide references from other CRT clients? Recommended

✓ References verify the trustee's reliability, knowledge, and ability to handle tax compliance issues.

✗ A lack of references suggests the trustee may not have the necessary experience or track record.

Is the trustee a licensed professional or established institution? Critical

✓ Banks, trust companies, and licensed fiduciaries have the expertise and insurance to handle complex trust management.

✗ Family members without professional experience often lack the objectivity and knowledge needed for proper trust management.

When you set up a charitable remainder trust, you’re not just giving money away-you’re creating a long-term financial engine that pays you or someone you choose for life, then leaves the rest to charity. But who actually handles the money? Who decides when to sell assets, how to invest, and how much to pay out each year? It’s not you, not the charity, and not a random person you pick at a dinner party. There’s a specific role, and it matters more than most people realize.

The Trustee Is the One in Charge

The person or organization that manages the money in a charitable remainder trust is called the trustee. This isn’t a title you give to a friend just because they’re good with spreadsheets. The trustee has legal responsibility for the trust’s assets, investments, distributions, and compliance with tax laws. They’re the only one who can legally sign checks, buy or sell property held in the trust, and make decisions about how the money grows over time.

Think of the trustee like a pilot flying a plane. You (the donor) built the plane and chose the destination (the charity), but the pilot has to fly it safely, follow air traffic rules, and make real-time decisions based on weather and fuel. If the pilot messes up, the plane crashes-and in this case, the trust could lose its tax-exempt status, face penalties, or fail to pay beneficiaries.

Who Can Be a Trustee?

You have three main choices when picking a trustee for your charitable remainder trust:

A bank or trust company - This is the most common choice. Banks like Wells Fargo, BNY Mellon, or local community banks have dedicated trust departments. They’re professional, experienced, and insured. They charge a fee-usually 1% to 1.5% of assets per year-but they handle everything: accounting, tax filings, investment management, and distribution schedules. They also stay neutral, which helps avoid family drama later.
A professional fiduciary - These are licensed individuals, often attorneys or financial advisors, who specialize in managing trusts. They’re more flexible than banks and sometimes cheaper, especially for smaller trusts. But they’re harder to find, and you need to check their credentials carefully. Not everyone who says they’re a fiduciary actually is.
A family member or friend - Possible, but risky. If your cousin John is great at fixing cars but doesn’t know the difference between a bond and a stock, he shouldn’t be managing your trust. The IRS doesn’t care how nice John is. If he mismanages the assets or misses a tax deadline, the trust could lose its tax benefits, and you could owe penalties. Only choose this option if the person has real experience, understands fiduciary duty, and is willing to get professional help when needed.

What Does the Trustee Actually Do?

Managing a charitable remainder trust isn’t just about keeping money in a savings account. Here’s what the trustee actually does day to day:

Invests the assets - The trust holds cash, stocks, real estate, or even private business interests. The trustee must invest these to generate income for the beneficiary while preserving the principal for the charity. That means balancing growth and safety. A conservative portfolio might pay out $30,000 a year but leave $500,000 to the charity. An aggressive one might pay $50,000 but leave only $200,000-or even nothing if the market crashes.
Calculates and pays distributions - The trust pays out either a fixed amount (charitable remainder annuity trust) or a percentage of the trust’s value each year (charitable remainder unitrust). The trustee recalculates the value annually (for unitrusts), figures out the payout, and sends the money to the beneficiary. Miss a payment? That’s a breach of fiduciary duty.
Files tax returns - Charitable remainder trusts file IRS Form 5227 every year. The trustee must track income, capital gains, distributions, and charitable deductions. They also issue K-1 forms to beneficiaries. Mess this up, and the IRS could treat the trust as a taxable entity, wiping out decades of tax savings.
Manages the final transfer - When the beneficiary dies (or the term ends), the trustee transfers the remaining assets to the named charity. This sounds simple, but if the trust holds illiquid assets like real estate or private equity, the trustee must sell them or arrange for transfer in kind. If they don’t, the charity doesn’t get what was promised.

Contrasting images of poor trust management versus expert management of charitable trust assets.

Why It Matters Who You Choose

Choosing the wrong trustee can cost you money, time, and even your legacy. Here are two real examples:

In 2022, a donor in Ohio named his daughter as trustee of a $1.2 million charitable remainder trust. She didn’t know how to handle the investments. She kept the money in a low-interest savings account for five years. By the time the trust ended, the principal had shrunk by 30% due to inflation. The charity received $800,000 instead of the expected $1.1 million. The donor’s family sued, but the court ruled the daughter wasn’t liable-because she never signed a fiduciary agreement.

In contrast, a retiree in Florida set up a trust with a regional bank. The bank invested in a diversified portfolio of bonds and dividend stocks, rebalanced annually, and paid out 5% of the trust’s value each year. When the donor passed away at 89, the charity received $1.4 million-$200,000 more than the original principal. The trustee’s discipline made the difference.

What Happens If the Trustee Quits or Dies?

Most trust documents include a backup trustee. But if they don’t, the court will appoint one. That’s expensive, slow, and unpredictable. You don’t want a judge deciding who manages your legacy. Always name at least one successor trustee in the trust document. And if you’re using a bank or professional, ask: “What happens if your trust department gets sold or restructured?” Some banks transfer trusts to other divisions without telling you. Make sure your trust is protected.

A trustee handing a final charitable donation check to a nonprofit representative after a donor's passing.

How to Pick the Right Trustee

Here’s how to make sure you pick someone who won’t mess it up:

Ask for a written fiduciary agreement - This outlines their duties and limits their liability. Banks provide this. Individuals rarely do.
Check their experience - Ask how many charitable remainder trusts they manage. If they say “a few,” walk away.
Look at fees - A 1% fee on a $1 million trust is $10,000 a year. That’s steep, but if they earn you $50,000 more in returns than a DIY approach, it’s worth it.
Get references - Talk to other clients. Ask: “Did they respond to questions? Did they file taxes on time? Did they explain things clearly?”
Don’t let emotion override logic - Just because your nephew is a CPA doesn’t mean he’s the right person. He might be too busy, too emotional, or too inexperienced.

What the Charity Can’t Do

A common myth is that the charity manages the trust. They don’t. The charity is the final beneficiary-they get what’s left after the income payments stop. They have no authority over investments, distributions, or timing. Even if the charity is your favorite nonprofit, they can’t step in to fix a bad trustee. They only get involved at the end.

That’s why it’s critical to choose your trustee before you sign the trust documents. Once the trust is funded, changing the trustee is possible-but it’s complicated, expensive, and sometimes requires court approval.

Final Thought: Your Legacy Is in Their Hands

A charitable remainder trust is one of the most powerful tools for giving back while keeping income for yourself. But it’s not a set-it-and-forget-it deal. The trustee is the linchpin. Get them right, and your money works for decades-helping you, your family, and your cause. Get them wrong, and your generosity turns into a financial mess.

Don’t leave this to chance. Talk to a financial advisor who specializes in charitable giving. Review the trustee’s track record. Ask hard questions. Because when it comes to your legacy, the person managing the money isn’t just an administrator-they’re the guardian of your values.

Can I be my own trustee in a charitable remainder trust?

Yes, you can name yourself as trustee, but it’s rarely a good idea. You’re both the donor and the manager, which creates a conflict of interest. The IRS allows it, but if you make a mistake-like paying yourself too much or investing too aggressively-the trust can lose its tax-exempt status. Most estate planners recommend using a third party to avoid this risk.

How much does a trustee charge for managing a charitable remainder trust?

Most banks and professional trustees charge between 1% and 1.5% of the trust’s assets per year. For a $1 million trust, that’s $10,000 to $15,000 annually. Some charge a flat fee or hourly rate, especially smaller fiduciaries. Always get the fee structure in writing before signing. Remember, a higher fee might be worth it if the trustee generates better returns or avoids costly mistakes.

Can the charity replace the trustee?

No, the charity cannot replace the trustee unless the trust document gives them that power-which is rare. The trustee is accountable to the donor and the beneficiaries, not the charity. If you’re unhappy with the trustee, you must change them before the trust is funded, or get a court order after the fact. That’s why choosing the right trustee upfront is critical.

What happens if the trustee goes bankrupt or closes down?

If a bank or trust company managing your trust fails or is acquired, the trust assets are protected by law-they’re held separately from the institution’s own funds. The trust will typically be transferred to another department or a new trustee, and you’ll be notified. Always ask your trustee what their contingency plan is before you sign.

Do I need a lawyer to set up a charitable remainder trust?

Yes. A charitable remainder trust is a complex legal document with strict IRS rules. Even small errors-like wrong beneficiary names or unclear payout terms-can invalidate the trust’s tax benefits. Work with an estate planning attorney who has experience with charitable trusts. Don’t use online templates. They’re not designed for the nuances of IRS Section 664.