--- title: "Avoiding Capital Gains on Stock: CRT & Flip CRUT Strategies | VIP Wealth Advisors" description: Sitting on highly appreciated company stock? Learn how a Charitable Remainder Trust (CRT)—especially a Flip CRUT—can help you avoid capital gains taxes, generate income, and give to causes you care about. image: https://vipwealthadvisors.com/hubfs/Diversify-Concentrated-Stock-With-Flip-CRUT-.jpg --- [![VIP Wealth Advisors](https://vipwealthadvisors.com/hs-fs/hubfs/VIP_WEALTH_ADVISORS_LOGO_WEB_334x80_WHITE.png?width=334&height=80&name=VIP_WEALTH_ADVISORS_LOGO_WEB_334x80_WHITE.png "VIP Wealth Advisors")](https://vipwealthadvisors.com) - [Services](https://vipwealthadvisors.com/services) - [Financial Planning](https://vipwealthadvisors.com/financial-planning) - [Tax Planning](https://vipwealthadvisors.com/tax-planning) - [Investment Management](https://vipwealthadvisors.com/investment-management) - [Estate Planning](https://vipwealthadvisors.com/estate-planning) - [Stock Options](https://vipwealthadvisors.com/stock-option-exercise-strategies) - [Budgeting & Cash Flow Analysis](https://vipwealthadvisors.com/budgeting-cash-flow-analysis) - [Insurance Review & Recommendations](https://vipwealthadvisors.com/insurance-review) - [Retirement Planning](https://vipwealthadvisors.com/retirement-planning) - [Education Planning](https://vipwealthadvisors.com/education-planning) - [Cryptocurrency](https://vipwealthadvisors.com/cryptocurrency) - [Home Purchase & Income Properties](https://vipwealthadvisors.com/income-property-home-purchase) - [Hourly Support](https://vipwealthadvisors.com/hourly-support) - [Pricing](https://vipwealthadvisors.com/pricing) - [About](https://vipwealthadvisors.com/about) - [How it Works](https://vipwealthadvisors.com/how-it-works) - [Investment Philosophy](https://vipwealthadvisors.com/insights/investment-strategy) - [Press](https://vipwealthadvisors.com/press) - [Professional Affiliations](https://vipwealthadvisors.com/professional-affiliations) - [Credentials](https://vipwealthadvisors.com/cfp-designations) - [What VIP Really Means](https://vipwealthadvisors.com/insights/story-behind-vip-wealth-advisors) - [Insights](https://vipwealthadvisors.com/media-hub) - [Articles](https://vipwealthadvisors.com/insights) - [Videos](https://www.youtube.com/@MarkThePrivateCFO) - [Contact](https://vipwealthadvisors.com/contact) - [Client Portal](https://vipwealthadvisors.com/client-portal) Hit enter to search or ESC to close [.](https://vipwealthadvisors.com/client-portal) Hit enter to search or ESC to close 1. [Home](https://vipwealthadvisors.com/) 2. [insights](https://vipwealthadvisors.com/insights) 3. charitable remainder trust concentrated stock July 7, 2025 [Mark Stancato, CFP®, EA, ECA, CRPS®](https://vipwealthadvisors.com/insights/author/mark-stancato-cfp) # Avoiding Capital Gains on Concentrated Stock: Use a Charitable Remainder Trust ![Dark blue financial illustration with trust documents, stock charts, IRS forms, and a philanthropic giving theme representing a Charitable Remainder Trust strategy.](https://vipwealthadvisors.com/hubfs/Diversify-Concentrated-Stock-With-Flip-CRUT-.jpg) Share this post: - - - ##### Share - - -   If you've worked at a tech company, university, or research institution for several years, chances are you're sitting on a highly appreciated, concentrated stock position. It may have come in the form of: - Early startup equity (ISOs, RSUs, or NQSOs) - Public company stock from ESPPs or open-market purchases - Restricted shares awarded during your tenure Whatever the case, you're now facing a familiar challenge: how do I diversify out of this position without triggering a massive tax bill? There's a creative yet often overlooked strategy that can help you solve this problem and support causes you care about: the **Charitable Remainder Trust (CRT)**. Even better, there's a special variation—the **Flip CRUT**—that's especially powerful for those whose stock is illiquid today but may not be tomorrow. Let's break it all down. ### What Is a Charitable Remainder Trust (CRT)? A Charitable Remainder Trust is a special type of irrevocable trust that allows you to: ✅ Donate highly appreciated assets (like stock) ✅ Receive an immediate charitable deduction ✅ Avoid upfront capital gains tax ✅ Generate income for yourself or your beneficiaries for up to 20 years—or your lifetime ✅ Leave the remainder to a qualified charity In essence, the CRT lets you give now and receive later, all while avoiding a significant taxable gain today. ### Why Tech Employees and Academics Should Care Wealthy families and major philanthropists have long used CRT strategies, but they're especially well-suited for: - Tech workers at pre-IPO or post-IPO companies with significant unrealized gains - Founders and early-stage employees who want to support causes, defer taxes, and create income ### CRT Mechanics: How It Works Here's a simplified version of how a CRT works using appreciated stock: 1. **You donate stock to the CRT.** Let's say you contribute $2 million of low-basis company stock (basis = $100,000). 2. **You receive an immediate charitable deduction.** The deduction is based on the present value of the future remainder that will be donated to charity, typically 10% or more of the donated value. 3. **The CRT sells the stock tax-free.** Because the CRT is a tax-exempt entity, it pays no capital gains tax on the sale of the appreciated stock. 4. **The proceeds are reinvested.** The CRT can now diversify the portfolio and invest in a range of income-generating assets. 5. **You receive income distributions for life or a set number of years.** This typically ranges from 5% to 8% of the trust's value, depending on the structure. 6. **At the end of the term, the remaining assets go to your chosen charity.** ### Charitable Remainder Annuity Trust (CRAT) vs. Unitrust (CRUT) There are two primary flavors of CRTs: - **CRAT** - Fixed annual payment (annuity-style); less flexibility; good for stable income and simplicity. - **CRUT** - Percentage of trust value annually; more flexibility; good for growth-focused, dynamic asset values. While CRATs pay a fixed amount, CRUTs pay a fixed percentage of trust value—so if the investments grow, your income grows. ### The Twist: Flip CRUTs for Illiquid Stock If your company stock is illiquid—think pre-IPO shares, restricted securities, or holdings with blackout periods—a traditional CRUT won't generate much income upfront. **Enter: The Flip CRUT** A Flip Charitable Remainder Unitrust (Flip CRUT) solves this problem by starting out as a net income CRUT (meaning it only pays income if the trust earns income) and later converting—or flipping—into a standard CRUT that pays a fixed percentage annually. #### How the Flip Works - You fund the CRT with illiquid assets (like private company stock). - While illiquid, the trust is in "Net Income Only" mode. No income distributions are required if the assets aren't producing income. - Once a triggering event occurs (such as a liquidity event or IPO), the trust transitions to a standard CRUT and begins making regular payments. #### Trigger Events Can Include: - An IPO or direct listing - A public tender or M&A transaction - A specific calendar date - The sale of the asset within the trust ### Tax Advantages of a CRT - **No capital gains tax at sale** - The CRT pays no tax when it sells the stock, allowing full reinvestment of proceeds. - **Charitable deduction** - You receive a deduction based on the estimated present value of the charity's future benefit. - **Income tax smoothing** - Instead of a large taxable gain in one year, you receive annual income payments taxed as ordinary income, capital gains, or a mix—depending on trust earnings. ### Real-World Example A software engineer at a high-growth private company owns $5 million of company stock with a $50,000 basis. They expect the company to go public in the next 18 months. - They establish a Flip CRUT today and contribute their illiquid shares. - They receive an immediate charitable deduction of approximately $500,000 (depending on terms and IRS discount rates). - Post-IPO, the shares are sold within the trust without triggering a capital gain. - They receive 6% of the trust value each year for life (~$300,000 annually). - The remainder goes to their alma mater and a donor-advised fund upon death. ### Strategic Combinations CRTs can be combined with: - Donor-Advised Funds (DAFs) to direct future charitable grants - Charitable Lead Trusts for multigenerational tax planning - Private foundations for families with complex philanthropic goals - QSBS planning for C-corp stockholders ### Final Thought Charitable Remainder Trusts are one of the most powerful—and most misunderstood—tools in advanced tax planning. They offer a rare combination of: - Tax deferral - Ongoing income - Philanthropic impact And for those with concentrated equity positions, especially in private companies or IPO-ready firms, the Flip CRUT variation unlocks planning flexibility that few other strategies can match. [👉 Book a call](https://vipwealthadvisors.com/meeting) if you're ready to explore how this could fit into your long-term strategy.   --- ### View More Articles by Topic - [Taxes (101)](https://vipwealthadvisors.com/insights/tag/taxes) - [Financial Planning (64)](https://vipwealthadvisors.com/insights/tag/financial-planning) - [Equity Compensation (49)](https://vipwealthadvisors.com/insights/tag/equity-compensation) - [Investments (37)](https://vipwealthadvisors.com/insights/tag/investments) - [RSU (26)](https://vipwealthadvisors.com/insights/tag/rsu) - [Retirement (24)](https://vipwealthadvisors.com/insights/tag/retirement) - [Tax Policy & Legislation (23)](https://vipwealthadvisors.com/insights/tag/tax-policy-legislation) - [Business Owner Planning (21)](https://vipwealthadvisors.com/insights/tag/business-owner-planning) - [Incentive Stock Options (20)](https://vipwealthadvisors.com/insights/tag/incentive-stock-options) - [Psychology of Money (18)](https://vipwealthadvisors.com/insights/tag/psychology-of-money) - 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[↑](https://vipwealthadvisors.com/insights/charitable-remainder-trust-concentrated-stock#top) [![Financial Planning Association](https://vipwealthadvisors.com/hs-fs/hubfs/FPA-logo.png?width=189&height=100&name=FPA-logo.png "Financial Planning Association")](https://vipwealthadvisors.com/professional-affiliations) [![XY Planning Network](https://vipwealthadvisors.com/hs-fs/hubfs/XY_Planning_Network.png?width=189&height=100&name=XY_Planning_Network.png "XY Planning Network")](https://vipwealthadvisors.com/professional-affiliations) [![NAPFA National Association of Personal Financial Advisors](https://vipwealthadvisors.com/hs-fs/hubfs/NAPFA.png?width=189&height=100&name=NAPFA.png "NAPFA National Association of Personal Financial Advisors")](https://vipwealthadvisors.com/professional-affiliations) [![Fee Only Network Member](https://vipwealthadvisors.com/hs-fs/hubfs/Fee-Only-Network-3.png?width=189&height=100&name=Fee-Only-Network-3.png "Fee Only Network Member")](https://vipwealthadvisors.com/professional-affiliations) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Mark Stancato, CFP®, EA, ECA, CRPS®", "sameAs" : [ "https://www.tiktok.com/@marktheprivatecfo", "https://www.youtube.com/@MarkThePrivateCFO", "https://www.instagram.com/marktheprivatecfo/", "https://www.linkedin.com/in/markstancato/", "https://www.facebook.com/marktheprivatecfo/" ], "url" : "https://vipwealthadvisors.com" }, "dateModified" : "2025-07-07T08:00:00-05:00", "datePublished" : "2025-07-07T08:00:00-05:00", "description" : "Sitting on highly appreciated company stock? Learn how a Charitable Remainder Trust (CRT)—especially a Flip CRUT—can help you avoid capital gains taxes, generate income, and give to causes you care about.", "headline" : "Avoiding Capital Gains on Concentrated Stock: Use a Charitable Remainder Trust", "image" : "https://vipwealthadvisors.com/hubfs/Diversify-Concentrated-Stock-With-Flip-CRUT.jpg", "mainEntityOfPage" : { "@id" : "https://vipwealthadvisors.com/insights/charitable-remainder-trust-concentrated-stock", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://vipwealthadvisors.com/hs-fs/hubfs/VIP-Wealth-Advisors-Logo-hz-750x394.png" }, "name" : "VIP Wealth Advisors" }, "url" : "https://vipwealthadvisors.com/insights/charitable-remainder-trust-concentrated-stock", "video" : { "@type" : "VideoObject", "contentUrl" : "https://youtube.com/shorts/kTOulQcGgTw", "description" : "Trying to sell your IPO shares or startup stock without triggering a massive tax bill? There's a smart, IRS-approved strategy called the Flip CRUT that lets you defer capital gains, generate income, and support causes you care about—all in one move. I've used this exact strategy to help tech professionals exit concentrated stock positions without losing half to taxes.", "embedUrl" : "https://www.youtube.com/embed/kTOulQcGgTw", "name" : "Avoiding Taxes on Your Startup Shares? Watch This First", "thumbnailUrl" : "https://img.youtube.com/vi/kTOulQcGgTw/maxresdefault.jpg", "uploadDate" : "2025-07-07T08:00:00-05:00" } } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "A CRT is an irrevocable trust that allows you to donate appreciated assets, avoid capital gains tax at sale, receive income for life or a set term, and leave the remainder to charity." }, "name" : "What is a Charitable Remainder Trust (CRT)?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "A Flip CRUT is a type of charitable remainder trust designed for illiquid assets. It starts in net income mode and 'flips' to a standard unitrust once a liquidity event occurs, like an IPO or asset sale." }, "name" : "What is a Flip CRUT?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Yes, but there are complexities. A Flip CRUT is often used when donating illiquid or restricted shares. The trust can delay income payments until a liquidity event occurs." }, "name" : "Can I donate private company stock to a CRT?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Yes. The deduction is based on the present value of the charity's future remainder interest. It's calculated using IRS discount rates and trust terms." }, "name" : "Do I get a tax deduction for funding a CRT?" } ] } ```