CRT vs SIS — How to Know Which is Better for Your California Sale

The CRT downside — read this first

Heirs receive nothing from the CRT itself. The trust remainder goes to charity.

At your death, the trust’s remaining corpus goes to the §501(c)(3) you named at funding — not to your kids, not to your spouse beyond their lifetime, not to family. The seller who funded the trust gives up the inheritance value of the asset entirely.

For sellers who care about leaving money to family, this is the deal-breaker that often kills the CRT conversation — until they see the GUL accounting:

Use $30K-$60K/yr of the CRT income to fund a Guaranteed Universal Life policy on your life (premium varies by age + health)
GUL provides a contractually-guaranteed death benefit of $1M-$5M+ to heirs, paid tax-free under IRC §101(a)
The death benefit REPLACES the inheritance the heirs “lose” from the CRT remainder going to charity
Net result: heirs end up with as much OR MORE than a cash sale would have given them, AND charity gets the trust remainder, AND you get lifetime income, AND you get the upfront tax deduction

If you cannot or will not fund GUL alongside the CRT (health-disqualified, premium-prohibitive, no heir intent), then the CRT’s “leaves nothing for family” reality is what it is — and you should weigh whether the SIS (which DOES pass remaining payments to heirs, taxable as IRD) is the better fit.

The one question that decides it

Did you already plan to leave money to charity at death?

If YES — the CRT (Charitable Remainder Trust) almost always wins on $2M+ sales. The IRS gives you full capital-gains-tax elimination in exchange for the eventual charitable gift you were going to make anyway.

If NO — the SIS (Structured Installment Sale) almost always wins. You spread the gain across years, compress brackets, and keep 100% of the principal in your family.

Everything else (income level, age, asset type, complexity tolerance) is a tiebreaker for edge cases. The charitable-intent question is the gate.

Side-by-side mechanics

Mechanic	SIS · IRC §453	CRAT · IRC §664
Who sells the asset	You sell directly to the buyer	The TRUST sells (after you donate the asset)
Tax treatment	Spread — pro-rata gain recognition each year payments received	Eliminated — trust is tax-exempt §664 entity, sale is non-taxable
Who pays you	A-rated insurance carrier (via assignment company)	The trust pays you (from invested proceeds)
Payment type	Fixed annuity, locked at funding, 5-40 year term	Fixed % of initial trust value (CRAT) or current value (CRUT)
Upfront tax deduction	None	YES — charitable deduction ~34-50% of asset value
What happens at death	Remaining payments go to heirs (taxable to them)	Trust remainder goes to charity (NOT heirs)
Estate-attorney complexity	Low — one extra addendum to the Purchase Agreement	High — trust document, ongoing trust accounting, Form 5227 annual filing
Setup cost (legal/admin)	$0-$5K (escrow handles assignment paperwork)	$8K-$25K (attorney + ongoing trustee fees)
Liquidity / commutability	Non-commutable — payment schedule locked	Non-commutable — trust corpus stays in trust until death
§453A >$5M issue	Interest charge applies on deferred tax liability	No §453A — trust is not a taxable person
Best fit profile	Sellers with no/low charitable intent, $500K-$5M gain	HNW sellers with charitable intent, $2M+ gain, $300K+ income

Side-by-side math: $5M California sale, $500K ordinary income, age 65

Same seller, same property, same year. Here’s what each structure produces:

Cash sale baseline (the "do nothing" path)

Capital gains tax: $1,895,000 (federal 20% + NIIT 3.8% + CA 13.3% + Mental Health 1%)
After-tax proceeds: $3,105,000
Annual income from 5% MYGA: ~$155,000 (taxed annually)
To heirs at death: ~$3,105,000 (depleted)

SIS — 20-year structure

Capital gains tax over 20 years: ~$1,250,000 (compressed brackets, no NIIT, lower CA marginal)
§453A interest charge: ~$30K-$60K/year (premium >$5M triggers it)
Annual income from carrier: ~$310,000 (mixed gain/interest/return-of-principal)
Total to you over 20 years: ~$6.2M nominal
To heirs (if you die mid-term): remaining payments, taxable to them
Total economic value: ~$6.2M to you, $0 to charity

CRT + GUL — donate first, sell tax-free

Capital gains tax: $0 (trust is §664 tax-exempt entity)
Charitable deduction: $1,700,000 → ~$680,000 cash value at $500K AGI
Annual CRT payout: $250,000 gross → ~$195,000 after-tax
GUL premium (funded from CRT income): ~$45,000/yr → $5M guaranteed death benefit
Illustrative net spendable: ~$150,000/yr × 25 yrs = $3.75M
To heirs (GUL): $5,000,000 tax-free
To charity: ~$3,500,000
Total economic value created: ~$12.25M

The honest scoreboard

Outcome	Cash sale	SIS	CRT + GUL
Tax paid Year 1	~$1,895,000	$0 (spread)	$0 (eliminated)
Annual income	~$155K	~$310K	~$150K (net of GUL)
Total to you over life	~$3.1M	~$6.2M	~$3.75M
To heirs at death	$3.1M (depleted)	Remaining payments	$5M tax-free (GUL)
To charity	$0	$0	$3.5M
Total economic value	~$3.1M	~$6.2M	~$12.25M

The CRT typically wins on TOTAL economic value for this profile ($12.25M vs $6.2M). But notice: the SIS typically wins on cash to you personally ($6.2M vs $3.75M). If the seller has no charitable intent, the SIS’s extra $2.45M to them is worth more than the CRT’s charitable + heir component they didn’t want.

The decision tree

Did you already plan to leave money to charity at death?
- NO → SIS (skip to step 2)
- YES → continue to question 2
Is your capital gain $2M or more?
- NO → SIS (CRT’s legal/admin cost doesn’t justify the structure on smaller gains)
- YES → continue to question 3
Is your ordinary income $300K+ for the next 6 years?
- NO → SIS (CRT’s charitable deduction goes partially wasted)
- YES → CRT is the right tool
If CRT — do you want heirs to receive an inheritance?
- NO → CRT alone (charity gets everything)
- YES → CRT + GUL combo (charity gets remainder, heirs get tax-free death benefit)

Cases where each typically wins

SIS typically wins

No charitable intent at all (you want everything to family)
Capital gain under $2M (CRT cost not justified)
Ordinary income under $200K (CRT deduction can’t be absorbed)
Age under 55 (CRT actuarial table favors older sellers; SIS works at any age)
You want low complexity (one assignment vs trust + Form 5227 every year)
You want maximum cash to YOU personally (not split with charity)

CRT typically wins

Existing charitable intent (the trust isn’t a cost — it’s the gift you were going to make)
$5M+ capital gain where §453A interest charge erodes SIS advantage
Estate above the federal exemption ($13.6M individual) — CRT removes the asset from your estate
$500K+ ordinary income that needs the deduction
Age 60+ with healthy GUL underwriting (combo gets all three: family + charity + tax)
Long-tenure highly-appreciated asset (CA real estate held 20+ years with massive recapture)

What if you’re close to the line?

For sellers genuinely in the middle — modest charitable intent, $2-4M gain, $200K-$400K income — both structures produce reasonable outcomes. Three tiebreakers:

How much do you care about the heir inheritance?If a lot → SIS (heirs get remaining payments). If not much → CRT (charity gets remainder).
How comfortable are you with ongoing trust complexity?Trust accounting, Form 5227 annually, dealing with the trustee. If low tolerance → SIS.
How important is the upfront tax deduction?CRT gives you a big income-tax deduction in Year 1 (worth ~$170K cash on a $2M sale). SIS gives nothing upfront.

Run both paths through the calculator

The calculator on this site models cash, SIS, and CRT side-by-side for your specific California sale. Run it once with your actual numbers and the answer becomes obvious in 30 seconds.

Run the calculator → 213-414-2808

CRT vs SIS — How to Know Which Is Better