The former All Blacks' fullback helped Scott Robertson guide the team to their first Super Rugby title in nine years with their 25-17 victory over the Lions in Johannesburg in August.
MacDonald will move back to his home town of Blenheim, about five hours north of Christchurch, and is to take on a resource coaching role for the team.
"Stepping back from the ... role was certainly not an easy decision to make, however the family's preference is to be living back home in Blenheim so that is absolutely where I need to be," MacDonald said.
"I am grateful to the Crusaders for the amazing opportunity to be a part of their coaching team this year and for allowing me to continue contributing next year from the northern end of the Crusaders region."
The team's chief executive, Hamish Riach, said MacDonald had done an "outstanding" job with the Crusaders.
"We understand and respect his reasons for stepping aside from the assistant coach role to allow him to remain with the family in Blenheim, and we are just happy that he is still keen to be involved," he added.
The Crusaders open their title defence of a revamped Super Rugby competition, which will have three fewer teams next year, against the Waikato Chiefs on Feb. 24.
(Reporting by Greg Stutchbury; Editing by Peter Rutherford)
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