Accounting

The tax pros and cons of charitable remainder trusts

Published

1 year ago

March 17, 2025

For clients with highly appreciated assets aiming to transfer part of their holdings to an heir in a tax-efficient way while giving to a nonprofit, charitable remainder trusts could be a fit.

Charitable remainder trusts (CRTs), charitable remainder annuity trusts (CRATs), charitable remainder unitrusts (CRUTs) or net income charitable remainder unitrusts (NICRUTs) are simply potential pieces of a multifaceted estate plan — but financial advisors, tax professionals and, especially, their clients could be forgiven for getting a bit of a headache when seeing their accompanying acronyms. At the basic level, wealthy families use charitable remainder trusts to get a tax deduction for the donation, avoid capital gains duties and provide income to a beneficiary.

While they are “something that is not going to be applicable to everyone,” charitable remainder trusts may act as “a spoke in the wheel” in an estate plan, according to Eric Swensen, a wealth advisor and the chief planning officer with Walnut Creek, California-based Adero Partners.

Use cases

The end of the so-called stretch strategy for individual retirement account beneficiaries requiring them to accept the income over no more than 10 years added to the appeal of charitable remainder trusts, which could tack on decades because they’re only subject to a “5-50-10” rule. That means the trusts must pay out between 5% to 50% of their assets each year and leave a minimum of 10% to the charity. Along the way, the tax advantages could aid clients in pushing down their taxable income in retirement while bolstering a nonprofit of their choice and providing for the beneficiary.

“You should be looking at your Social Security, IRAs and 401(k) distributions as your main source of income,” he said. “CRTs can be good for a portion of the assets to help support that primary income in retirement. … If you have enough assets for yourself, and you want to be able to help aging parents or other beneficiaries with income, this can be a good option as well.”

To illustrate what charitable remainder annuity trust can do, a working academic paper posted in December by a researcher at the University of the Cumberlands used the example of a fictional couple named Martha and Benny Franklin. With a net worth of $21.55 million, the Franklins used a CRAT as part of their attempt to ease the tax impact from passing down an array of assets that included $1 million in cash, $6 million in securities, business interests valued at $6 million, real estate investments totaling $3 million and personal residences amounting to $3.5 million. At the same time, the family aimed to ensure each of the children would have enough assets to pay for college some day and set up a special needs trust for one of the couples’ grandchildren.

“Overall, Benny has been proactive in planning his wealth management by using charitable giving,” the study’s author, Trey Jackson, wrote. “He has set up a CRAT and three irrevocable trusts for his sons. The CRAT was funded with hot stock, evidencing Benny’s commitment to philanthropy while achieving some level of income for their lifetimes. However, the currently existing trusts were not set up in a manner designed to maximize the advantages of annual exclusions, nor were they really designed with ultimate tax efficiency.”

Complicating factors

The paper details the many complexities involved with how each type of asset interacts with the others inside the estate’s holdings, and lays out possible methods for addressing them. The difference between a charitable remainder annuity trust and a charitable remainder unitrust comes from the greater flexibility in the latter vehicle, which enables adjustments to the payments to beneficiaries based on shifts in value each year, Swensen noted. The annuity vehicle pays the beneficiary the same set percentage or dollar amount each year. Alternatively, the net income version could give clients and their heirs more wriggle room if they’re currently living in a high-tax state yet plan to migrate to one with lower duties some day.

“You can set it up now, you can get the deduction now, but you can defer the income until later,” Swensen said. “It’s a great highly leveraged gift, especially if you have a big spread in your cost basis there.”

Charitable remainder trusts pose some risks, though, from the ramifications to their payouts based on downturns in stock values or other problems with the underlying assets. The failure of a business tied to a charitable remainder trust for one Swensen’s clients unfortunately led to the vehicle never passing any assets to the philanthropic recipient, he said.

“I inherited a client who had put an investment in a vineyard into a CRT, and that vineyard went under. Lucky for them, they were able to get the deduction up front,” Swensen said. “These things aren’t bulletproof, and don’t always work out in all the ways.”

Tap a lawyer or a CPA

Those caveats explain why only a few out of more than 900 clients working with his firm are using charitable remainder trusts. Regardless of their level of expertise, advisors could still build up their knowledge of the possible uses for the vehicles by picking the brains of certified public accountants or estate lawyers with an eye toward collaboration in the future, Swensen said.

“Once you build that team, it also helps with confidence for talking with clients about them, too,” he said. “So, when it does come up, I can tell that client, ‘Hey not only do I think this is a great solution for you, but I’ve got a team in place that can make this really easy for you.'”

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

4 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.

Accounting

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

Published

4 days ago

July 20, 2026

Business Finance News

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

WASHINGTON — In a major escalation of cross-border trade friction, U.S. President Donald Trump has signed executive orders imposing new 50% tariffs on a wide selection of Canadian exports, citing discriminatory practices by Ottawa targeting American auto, dairy, and beverage industries.

The new duties, announced Monday, will take effect in 30 days. They target a broad spectrum of consumer and industrial goods—ranging from wine, liquor, and milk products to commercial cement, furniture, clothing, and hockey equipment.

Untested Legal Mechanism

To enact the sweeping measures, the administration invoked Section 338 of the Tariff Act of 1930—a rarely used legal provision allowing the executive branch to levy additional tariffs of up to 50% on foreign nations deemed to discriminate against U.S. commerce.

White House officials noted that Section 338 addresses trade discrimination rather than national security or economic emergencies. The move comes months after prior global emergency tariffs faced legal challenges in domestic courts, signaling Washington’s pivot toward alternate statutory authorities to maintain import duties.

Senior administration officials briefed reporters that the measure directly responds to Canadian provincial bans on U.S. alcohol, restrictions on American vehicle exports, and import quota disparities affecting U.S. dairy and cheese producers relative to third-party trading partners.

“While the administration continues to secure reciprocal trade agreements globally, Canada retaliated against efforts to protect domestic industry,” U.S. Trade Representative Jamieson Greer stated.

USMCA Impact and Carve-Outs

Significantly, the newly ordered 50% duties will apply to designated items even if they otherwise comply with the United States-Mexico-Canada Agreement (USMCA).

However, the administration confirmed key targeted exemptions:

Energy products (including oil and natural gas)
Potash and critical minerals
Fish and seafood
Goods already governed by sector-specific duties (such as existing steel and aluminum tariffs)

Administration representatives emphasized that the tariffs do not stem from recent disputes concerning drifting Canadian wildfire smoke, noting that policy options regarding environmental spillover remain under separate review.

Canadian Response and Market Reaction

Following the White House announcement, the Canadian dollar experienced a sharp decline against the U.S. dollar, falling approximately 0.4% during evening trading.

Canadian Prime Minister Mark Carney issued a statement emphasizing that Canada’s earlier counter-duties had merely matched previous U.S. trade actions. “Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens,” Carney stated, pointing to detailed proposals Ottawa submitted to modernize the USMCA framework.

Ontario Premier Doug Ford took a firmer stance, urging a “dollar-for-dollar” reciprocal response if the measures go into effect on August 19.

With a 30-day implementation window before the duties officially lock in, industry associations and trade groups on both sides of the border are calling for urgent bilateral negotiations to avert further supply chain disruption across North America.

Accounting

Automated Continuous Auditing: Transforming Compliance and Real-Time Financial Oversight

Published

4 days ago

July 20, 2026

Business Finance News

Transforming Compliance and Real-Time Financial Oversight

The traditional accounting paradigm—defined by periodic monthly closures and post-hoc annual audits—is rapidly giving way to continuous, automated financial oversight. As of July 2026, forward-thinking accounting practices and multinational corporate finance departments are leveraging continuous auditing systems powered by advanced machine learning models. These systems monitor operational transactions in real time, shifting audit methodologies from sample-based post-analysis to absolute, 100% transaction-level verification.

The operational advantages of continuous auditing are transformative. Standard auditing procedures historically relied on statistical sampling, which, despite rigorous methodology, inherently left gaps where anomalies or fraudulent transactions could go undetected for months. Modern continuous auditing platforms integrate directly with enterprise resource planning (ERP) databases, instantly cross-referencing purchase orders, invoices, bank feeds, and tax records. Any deviation from established control parameters or unusual transaction behavior triggers immediate flags for internal audit teams, dramatically reducing detection lag from quarters to seconds.

Beyond fraud prevention, continuous auditing fundamentally alters internal reporting and decision-making. Executive leadership no longer has to wait weeks after the close of a quarter to evaluate precise financial standing; real-time verified ledger data provides an uninterrupted view of operating margins, tax liabilities, and cash flow dynamics. This real-time visibility enables corporate controllers to adjust capital allocation strategies dynamically, mitigating liquidity constraints and capitalizing on emerging commercial opportunities far more efficiently than competitors bound to legacy reporting cycles.

However, implementing continuous auditing requires accounting professionals to acquire new analytical capabilities. The role of the auditor is evolving from manual data reconciliation toward system validation, algorithmic model governance, and strategic risk interpretation. Accounting firms and corporate finance departments must invest in continuous technical education, ensuring that audit staff possess the data engineering skills necessary to design, maintain, and evaluate complex automated compliance systems.