A CRUT cannot be funded with mortgaged real estate. The three best options are: The donor can pay off the mortgage with other assets and funds the CRUT with the unencumbered real estate. He  might mortgage some other piece of property instead, and then use some of the income from the CRUT to make the mortgage payments. If your charity’s gift acceptance policies and your state’s regulations allow, the donor can fund a Charitable Gift Annuity (CGA) with the value of the real estate net of the mortgage. However, this will trigger a "bargain sale, causing the donor to recognize gain on a portion of the value of the property. The donor can give your charity the property immediately or through a bequest. If the property is still encumbered at the time of the gift, this will trigger a "bargain sale" to the extent of the outstanding principal on the mortgage loan.