Gifts of Real Estate
Eileen and her husband,
Paul, enjoyed their house. They had
raised their three children there and
had many family memories. But after
Paul passed away suddenly, 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."
"Paul 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."
"My 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 taxes."
Depending 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.
Often our real estate holdings, be it our house, a second home or investment property, are a significant part of our net worth.
Gifts of real estate, therefore, 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.
Also, 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 WBAA Public
Radio, please contact
us to discuss its suitability.
In addition to making
a significant contribution, there can
be other benefits for you:
- There may be
a charitable income tax deduction
that would lower your income tax.
- If 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.
There can be significant
advantages to using property as a charitable
gift. Please contact
us to discuss your unique circumstances.
