Twenty-Eight Years of Work and a $707,000 Bill
Marcus Webb started his landscape design and installation company in Plano, Texas, with a pickup truck, a trailer, and twelve residential accounts in the summer of 1997. By the time he turned sixty-four in 2025, Webb Landscape Group employed forty-one people, held contracts with commercial developers across Collin and Denton counties, and carried a valuation that his CPA had once described — with genuine surprise — as "significantly better than my other clients in your industry." A regional landscape management company made an acquisition offer in late 2025 at $3.15 million. Twenty-eight years of seven-day weeks distilled into a number on a term sheet.
His CPA ran the numbers within the week. Marcus had originally invested approximately $85,000 into the business and had been paying taxes on its income for nearly three decades. His adjusted tax basis — what the IRS would recognize as his cost for purposes of calculating gain — was approximately $180,000. The capital gain: $2,970,000. Federal long-term capital gains tax at the 23.8% combined rate (20% capital gains plus 3.8% net investment income tax): $706,860. Texas has no state income tax, so that number wouldn't grow — but it wouldn't shrink either.
Marcus had been planning to fund his retirement with the sale proceeds. He had already spoken with a financial advisor about investing the full $3.15 million, living off the income, and helping his two adult children purchase homes in Frisco. The $707,000 was not in the plan. It was money earmarked for retirement, redistributed to the federal government in a single spring filing.
A friend who had recently updated his estate plan mentioned something Marcus had never heard of: a charitable remainder trust. Marcus was skeptical. He had given modestly to his church in Plano over the years but had never considered himself a philanthropist at scale. He made the call anyway.
What his estate planning attorney explained changed the trajectory of the entire transaction.
What Most Texans Get Wrong About Selling Appreciated Assets
The standard assumption is that capital gains taxes on the sale of a business, investment property, or appreciated stock are simply the price of success — an unavoidable cost of converting decades of work into liquid wealth. This framing is accurate for straightforward direct sales. It is not accurate for taxpayers willing to restructure the transaction before it closes.
A charitable remainder trust (CRT) is an irrevocable trust structure authorized under Internal Revenue Code § 664. It has existed in its modern form since the Tax Reform Act of 1969. It is not a loophole or a gray-area strategy. It is a tool Congress specifically designed to allow donors to contribute appreciated assets, generate retirement income, and support charitable causes — in a sequence and structure that defers capital gains tax rather than eliminating it entirely, but does so in a way that can meaningfully change the after-tax picture for families with significant appreciated assets.
The counterintuitive insight: most of the families and business owners who could benefit from a CRT never learn about it until after the transaction closes — at which point the window has permanently passed. The contribution to the trust must happen before the sale, not after. This timing requirement is the single most important fact about charitable remainder trust planning, and it is the fact most often missed.
How a Charitable Remainder Trust Actually Works
The mechanics are more straightforward than the name suggests. The asset owner contributes an appreciated asset — a business, real estate, publicly traded stock, a partnership interest, farmland — to an irrevocable trust before the sale closes. The trust, which is tax-exempt under § 664, sells the asset. Because the trust itself is a tax-exempt entity, the sale inside the trust does not trigger immediate capital gains tax at the trust level. The full sale proceeds remain inside the trust, available to invest and compound without first being reduced by a tax event.
In return for the contributed asset, the donor receives an income stream from the trust for life, for the joint lifetimes of the donor and spouse, or for a fixed term of up to twenty years. This income stream takes one of two forms:
- Charitable Remainder Annuity Trust (CRAT): Pays a fixed dollar amount annually — a percentage of the trust's initial fair market value, set at inception and unchanging. Predictable income; no ability to make additional contributions after the trust is funded.
- Charitable Remainder Unitrust (CRUT): Pays a fixed percentage of the trust's value, revalued annually. Income fluctuates with investment performance — rising in good markets, falling in poor ones. Most clients planning a long retirement prefer a CRUT because the income can grow over time. Additional contributions are permitted after the initial funding.
IRS rules require the annual payout rate to fall between 5% and 50% of the trust value, and the present value of the remainder interest (what the charity ultimately receives) must equal at least 10% of the initial contribution — calculated using IRS actuarial tables and the applicable federal rate in effect at funding.
The income distributions are not tax-free. The donor pays income tax on payments as received, in a tier system: ordinary income first, then capital gains, then tax-free return of basis. The deferred gain on the contributed asset flows through to the donor over the distribution period rather than being recognized all at once in the year of sale. For a transaction that would otherwise trigger a $707,000 federal tax bill in a single year, spreading that recognition across twenty years of retirement income is a material advantage — particularly for a Texas resident whose combined marginal rate on a one-time $2.97 million gain would be significantly higher than the rate on $150,000 of annual income.
The third piece: the donor receives a charitable income tax deduction equal to the actuarial present value of the remainder interest — what the charity is expected to receive at the end of the income period. For a sixty-four-year-old contributing $3.15 million to a CRUT paying 5% annually, the deduction may be in the range of $700,000 to $1,000,000, depending on current interest rates. Under the 2026 rules enacted through the One Big Beautiful Bill Act, itemizing taxpayers may deduct charitable contributions only above a 0.5% AGI floor, and high-income taxpayers face a 35% cap on the value of charitable deductions in the contribution year — but unused deductions carry forward for five years, and the capital gains deferral benefit operates independently of the deduction limit. The CRT remains fully effective as a capital gains strategy even for donors whose deduction is partially phased out.
The Texas Math: A Side-by-Side Comparison
For Marcus Webb, the comparison between a direct sale and a CRUT looked roughly as follows.
Direct sale:
- Sale proceeds: $3,150,000
- Federal capital gains tax (23.8%): approximately ($707,000)
- Net available to invest in year one: approximately $2,443,000
CRUT structure (5.5% annual payout):
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- Contribution to trust: $3,150,000
- No immediate capital gains tax; full proceeds invested inside the trust
- Annual distribution: approximately $173,250 in year one (5.5% of $3,150,000)
- Charitable deduction: approximately $800,000–$1,000,000 (spread across current year and five carryforward years)
- Capital gain recognized over the distribution period as income is received, rather than in a single year
- At death or end of trust term, remainder passes to designated charity or donor-advised fund
The $707,000 that would have been paid immediately in a direct sale remains invested inside the trust, generating income. At a 6% annual return, the compounding difference between beginning with $2,443,000 versus $3,150,000 is substantial over a twenty-year retirement. The charitable deduction reduces the donor's ordinary income tax on distributions in the early years of the trust. And Texas's absence of a state income tax means the distributions from the CRT are taxed only at federal rates — a structural advantage over clients in California, New York, or Minnesota, where state capital gains rates can add 10 to 13 percentage points to the total tax picture.
The One Thing You Give Up — and How Some Families Address It
A charitable remainder trust is not a strategy for keeping assets in the family. When the trust terminates — at the donor's death, the surviving beneficiary's death, or the end of a fixed term — the remaining assets pass to the designated charitable beneficiary. The donor's children do not inherit those dollars. This is the trade-off, and it is a real one. No credible estate planning attorney will minimize it.
Many clients who use CRTs address this by combining the trust with a Wealth Replacement Trust — an irrevocable life insurance trust (ILIT) funded with the income stream or tax savings generated by the CRT. The logic: a portion of the annual CRT distributions, or the first-year tax savings from the charitable deduction, funds life insurance premiums inside an ILIT. The insurance death benefit, owned outside the taxable estate and passing income-tax-free to heirs, approximates or exceeds the value the heirs would have inherited from the CRT assets. Done correctly — and it requires careful actuarial and underwriting work to do correctly — the combination allows the donor to achieve the capital gains deferral, the income stream, the charitable legacy, and a meaningful inheritance for the family.
Whether this architecture makes sense depends on the donor's age, health, insurability, estate size, and philanthropic intentions. It is not the right structure for every CRT client. But for a business owner in their late fifties or early sixties, in reasonable health, with significant appreciated assets and some charitable inclinations, the math is often compelling.
A Note on QCD-Funded CRTs for Those 70½ and Older
The SECURE 2.0 Act created a planning opportunity that remains underused in 2026: taxpayers who are 70½ or older may make a one-time Qualified Charitable Distribution (QCD) of up to $55,000 from a traditional IRA directly to fund a charitable remainder annuity trust. The QCD is excluded from gross income, and the CRT then provides the donor with an income stream for life. This is not the same strategy as contributing a business or real estate to a CRT — the funded amount is smaller, and the QCD mechanics are distinct — but for retirees with large traditional IRAs who want to reduce their RMD exposure, generate lifetime income, and make a significant charitable gift, it is a tool worth understanding and discussing with an estate planning attorney.
What Marcus Decided
Marcus did not make his decision in one meeting. He spent several weeks reviewing the calculations with both his estate planning attorney and his CPA, modeling different payout rates, reviewing actuarial tables for his age and his wife Christine's age, and evaluating life insurance options through the ILIT structure. He ultimately structured a CRUT with a 5.5% annual payout, naming himself and Christine as joint income beneficiaries for their joint lifetimes. He designated a donor-advised fund — allowing him and Christine to direct the charitable gifts to specific organizations, including their church in Plano, during their lifetimes — as the charitable remainder beneficiary. He purchased a life insurance policy inside an ILIT, funded from the tax savings generated by the charitable deduction in years one through three, to provide his two children with a meaningful inheritance outside the probate estate.
The acquisition closed in March 2026. Marcus had no federal tax bill due that spring on the $2,970,000 of capital gain that would have cost him $707,000 in a direct sale. He received his first quarterly distribution from the CRUT in June. He told his attorney, at their follow-up meeting in April, that the thing he most regretted was not having this conversation fifteen years earlier — when the business was worth $800,000 and he had first started thinking seriously about retirement.
The window for a charitable remainder trust, unlike most estate planning decisions, closes at the moment of sale. Once the transaction is complete, the asset is no longer appreciated — it has been converted to cash, the gain has been recognized, and the tax is owed. The only time the CRT strategy is available is before closing. That is not a dramatic deadline. It is simply the one that matters.
Tax-Smart Estate Planning at WG Law
At WG Law, Carla Alston brings an LL.M. in Taxation from NYU School of Law — the most respected tax LL.M. program in the country — and nearly four decades of practice to clients navigating exactly this kind of tax-smart estate planning. As a former in-house tax attorney at Alcon Laboratories and the founder of her own estate planning and tax practice since 1993, Carla evaluates charitable remainder trusts not as isolated strategies but as components of a coordinated plan that accounts for retirement income, charitable intentions, estate tax exposure, and the legacy each client wants to leave. Taylor Willingham, the firm's founding attorney, has guided more than 10,000 Texas families through estate plans that coordinate giving, business succession, and intergenerational wealth transfer across every phase of family life.
If you own appreciated stock, business interests, real estate, or farmland and are considering a sale — or if you are approaching retirement and have never had a conversation about how charitable giving strategies might change your tax picture — those conversations are worth having before the transaction closes, not after.
Call 214-250-4407 or contact WG Law to request a consultation. We serve clients throughout Plano, Frisco, McKinney, Allen, Prosper, Celina, Southlake, and the greater Dallas-Fort Worth Metroplex from our offices in McKinney (7701 Eldorado Pkwy, Suite 200) and Southlake (1560 E Southlake Blvd, Suite 100, Office 116).
For related reading, see our articles on the capital gains trap hiding in old bypass trusts after OBBBA, 529 superfunding as a tax-smart estate planning strategy for Texas grandparents, and stepped-up basis and what it means for appreciated assets in Texas estates.
This article is provided for general informational purposes only and does not constitute legal advice. Charitable remainder trust calculations depend on IRS actuarial tables, applicable federal rates, and individual tax circumstances that vary by client. The figures and comparisons in this article use approximate values for illustrative purposes. The 2026 charitable deduction rules described reflect the One Big Beautiful Bill Act as understood at publication. For guidance tailored to your situation, consult a licensed Texas estate planning attorney and a qualified tax professional before any transaction involving appreciated assets.