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Gifts of Real Estate
Goal: Avoid capital gains tax on the
sale of a home or other real estate
Benefit: A charitable tax deduction and potential diversification with the possibility of reducing or eliminating capital gains tax
and her husband, Paul, enjoyed their house. They had raised their three children
there and had many family memories. But after Paul passed away, Eileen began to
find that the old house was a burden. Without Paul to take care of things and
with their children involved in their own families miles away, it seemed that
the house was too big, too old and even a bit lonely.
Eileen: "Paul always said that I was the solid one. If there was a decision to
be made I could get to the bottom line pretty quickly. Well, the bottom line was
that I needed to make a change for a number of reasons. I decided to move into
a smaller place in town, easier to take care of and one that was part of a neighborhood
where I could make some new friends and be a part of activities and things. And
where my grandchildren could still come and visit."
and I had talked about what to do when we got to this stage in our lives. I just
thought Paul would be here with me, but that wasn't to be. We had planned and
knew I would have enough money to live comfortably. Initially we thought I'd need
the money from the sale of the house, but I really don't."
advisor went over the numbers with me. If we sold it, there would be a large capital
gain and taxes to pay. But by putting the house in a trust that then sells it, I avoided having to recognize the taxable capital gain right away. The trust takes all the money from the sale of the house and invests it, and I get
the income from the trust for life. Then, an organization that is doing great
things will receive the remainder of the trust and that will even save some estate
on the circumstances that are involved, gifts of real estate can be an effective
means of planning a gift. Much of the individual wealth in America is invested
in real estate. While the first thought often is a home or farm, real estate also
can involve a vacation or second home, an apartment or commercial building, a
shopping center, or undeveloped land.
Gifts of real estate can enable us to make significant contributions. Each piece
of property and its unique circumstances need to be reviewed to determine the
suitability of the property as a gift. Generally speaking, a rule of thumb is
that an acceptable piece of property is one that can be readily sold.
there are many ways to donate property. It can be an outright gift, a retained
life estate, or placed in a
trust (such as what Eileen and her advisor set up). In any case, while we
discuss some generalities here about donating real estate, if you are considering
such a gift to Mon General Hospital , please contact us to discuss its suitability.
addition to making a significant contribution, there can be other benefits for
- There may be a charitable income tax deduction that would lower your income tax.
your property has appreciated in value since you acquired it, there might be a
large capital gain tax that would result if you sold it. By donating the property,
you may be able to avoid realizing the capital gains.
- Depending on your state regulations, you may be able to turn the property into
a gift that is structured to provide income for you and a beneficiary.
- If the property is your home or farm, you may be able to make a gift of it now
and continue to live in it for the rest of your life and receive tax benefits
the year of the gift.
- If the contribution from your property exceeds the allowable charitable deduction
limits, the deduction may be carried forward for five years.
can be significant advantages to using property as a charitable gift. Please contact
us to discuss your unique circumstances.
to Wills and Bequests story.