A charitable remainder trust with California connections must satisfy the federal structural rules under Internal Revenue Code Section 664, register with the California Attorney General’s Registry of Charitable Trusts within 30 days of funding, file an annual Form RRF-1 renewal with the Attorney General, and file an annual Form 541-B with the Franchise Tax Board. California generally conforms to the federal tax framework, so the trust itself pays no state income tax on its investment earnings, with one meaningful exception for unrelated business income. These are the California requirements for a charitable remainder trust, layered on top of the federal rules that make the trust valid in the first place.
Register With the California Attorney General
Every CRT operating in California registers with the Attorney General’s Registry of Charitable Trusts. The trustee must file the initial registration within 30 days of the trust first receiving property.1California Legislative Information. California Government Code 12585 Miss that window and the trust starts its life out of compliance.
After the initial registration, the trustee files an annual renewal on Form RRF-1 with a fee tied to the trust’s total annual revenue.2California Department of Justice. Annual Registration Renewal Fee Report to Attorney General of California Trusts with less than $50,000 in annual revenue pay $25, and the schedule scales up in brackets to a maximum of $1,200 for trusts above $500 million in revenue. Most individual CRTs sit in the lower brackets. The renewal is due four months and fifteen days after the end of the trust’s accounting period.
A trust that falls behind on the Attorney General renewal can be flagged as delinquent. Delinquency may trigger a minimum tax of $800 plus interest from the Franchise Tax Board, so the filing is not a formality.
File Form 541-B With the Franchise Tax Board
Alongside the Attorney General renewal, the trustee must file California Form 541-B with the Franchise Tax Board for every calendar year the trust exists.3Franchise Tax Board. Instructions for Form 541-B Charitable Remainder and Pooled Income Trusts The 541-B mirrors much of the information on the federal Form 5227, reporting the trust’s income, distributions, and asset values to the state.
How California Taxes a CRT and Its Beneficiaries
California follows the federal framework, so a properly structured CRT is exempt from California income tax on its investment earnings. The income beneficiary reports distributions on their California return and pays state income tax on them under the same tiered characterization used federally: ordinary income first, then capital gains, then tax-exempt income, then tax-free return of principal.
The place where California parts from federal law is unrelated business taxable income. At the federal level, a CRT that earns UBTI owes an excise tax equal to 100% of that income, though the trust keeps its overall exempt status.4Office of the Law Revision Counsel. 26 USC 664 – Charitable Remainder Trusts When California conformed to the federal framework in 2014, it took a different path. Instead of a 100% excise tax, California taxes UBTI at the normal trust income tax rates, which currently reach as high as 13.3%. The trust remains exempt on all other income. For a CRT holding partnership interests or other investments that can generate UBTI, the California bite on that income is significantly lighter than the federal one, but it is a bite the trustee has to plan for.
The Federal Structural Rules Your California CRT Must Also Satisfy
A trust that does not qualify as a CRT under federal law is not a CRT in California either, so the Section 664 structural rules function as California requirements by inheritance. Missing any of them disqualifies the trust from the start, with no fix-it-later option.
- Payout rate between 5% and 50%. For a charitable remainder annuity trust (CRAT), that percentage is measured against the initial funding value and the dollar payment is locked in for the life of the trust. For a charitable remainder unitrust (CRUT), it is measured against the trust’s assets as revalued each year.
- Duration limited to the lifetime of one or more named individuals or a fixed term of up to 20 years.
- 10% remainder test. At the time of each contribution, the present value of the charity’s expected remainder must equal at least 10% of the net fair market value of what was contributed, using the IRS Section 7520 discount rate in effect that month.
The 10% test is where young donors picking high payout rates for a lifetime term can run into trouble: too little is projected to remain for charity. Older donors and shorter fixed terms clear the test more easily. The Section 7520 rate stands at 4.6% as of April 2026, and a higher rate makes the remainder calculation more forgiving.5Internal Revenue Service. Section 7520 Interest Rates
Setting Up the Trust
Once the trust document is drafted and executed, the trustee applies for a federal Employer Identification Number from the IRS.6Internal Revenue Service. Get an Employer Identification Number The online application returns an EIN immediately, and nothing else can be properly titled or filed without it.
The donor then transfers legal ownership of the contributed assets to the trust. A brokerage re-registers publicly traded securities into the trust’s name. For California real estate, a new deed transferring title to the trustee must be drafted, executed, and recorded with the county. If the trust is funded with real estate, closely held business interests, or other hard-to-value property, a qualified independent appraisal is required to substantiate the federal charitable deduction, and the donor reports the non-cash contribution on IRS Form 8283 with the appraiser’s signature.
Ongoing Federal Filings That Run Alongside the California Ones
The federal compliance calendar runs in parallel with the state one. Each year the trustee files IRS Form 5227, the Split-Interest Trust Information Return, due April 15 following the close of the trust’s tax year, with an extension available on Form 8868.7Internal Revenue Service. Return Due Dates – Other Returns and Reports Filed by Exempt Organizations Form 5227 reports the trust’s income, gains, distributions, and the fair market value of its assets. The trustee also issues a Schedule K-1 to each income beneficiary showing the character and amount of their distributions for the year.
Watch the Self-Dealing Rules
CRTs are treated like private foundations under the self-dealing rules in Internal Revenue Code Section 4941. Any transaction between the trust and a “disqualified person,” which includes the donor, the donor’s family, and entities they control, triggers excise taxes even when the deal is at fair market value.8Internal Revenue Service. Self-Dealing and Other Tax Issues Involving Charitable Remainder Trusts Common California traps include renting trust-owned property to the donor, borrowing trust assets, or using trust-owned real estate personally. The initial tax is 5% of the amount involved for each uncorrected year, and a second-tier tax of 200% applies if the transaction is not unwound. These taxes land on the disqualified person, and the trustee reports them on IRS Form 4720.
Ending a California CRT Early
A CRT does not have to run its full term. If both the income beneficiary and the charitable remainder beneficiary agree, the trust can be terminated early and the assets divided based on the present value of each interest. In California, early termination typically requires approval from the Attorney General or a court with jurisdiction over the trust. An income beneficiary can instead sell their interest to a third party (treated by the IRS as a long-term capital asset) or assign it to the charitable remainder beneficiary and potentially claim an additional charitable deduction for the present value of what they gave up.
What Compliance Actually Costs
The three annual filings (Form 5227 federally, Form 541-B with the Franchise Tax Board, and Form RRF-1 with the Attorney General) represent a real administrative burden. Most trustees budget for professional preparation. Ongoing trust administration, including tax preparation and investment management, typically runs between $2,000 and $5,000 per year depending on the trust’s complexity. A donor who plans to fund a CRT in California should price that recurring cost into the decision before signing the trust document.