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Gifts of Real Estate
Philanthropy and Real Estate
When you consider making a charitable gift, you have many options as to what you contribute. You can give cash, stocks, bonds, collectibles, land, buildings or virtually anything of value.
The benefits of donating real estate may include:
- Reduced income, estate and property taxes;
- Lower insurance and upkeep costs;
- Avoidance of capital gains taxes;
- Financial security for loved ones;
- Increased lifetime income;
- Continued use of the contributed property during your life.
Outright Gifts
Generally, a person who makes a gift of real estate held for more than one year is entitled to an income tax deduction equal to the full value of the property contributed. In addition, the donor escapes capital gains tax on the profit that would have been taxable if the property had been sold. Estate tax savings are also possible.
Real Estate Gifts by Will
You may prefer to leave real estate through your will. Your gift can be outright or it can be contingent upon the happening of some event. For example, Peter would like to leave a parcel of land to his only son, Matthew. However, if Matthew dies before Peter, Peter directs that the property will pass to GRMC.
Give, But Keep Lifetime Use
If you own your home or farm—or even a vacation home—you may be able to make a gift of the property, obtain an immediate income tax deduction and still continue to use the property for as long as you wish.
Contribute Just a “Slice”
You also can give a “partial interest” in property and receive an immediate income tax deduction. For example, you could make GRMC the owner of a 10 percent interest in your vacation home. In order to qualify for the tax deduction, you would have to contribute a 10 percent interest in every ownership right, including the right to use the property. However, GRMC’s real benefit is that whenever the property is sold, the medical center will receive 10 percent of the proceeds—even if the sale doesn’t occur until after your death. The benefit to you is a deduction for about 10 percent of the value of the gift property.
Give the Land, Keep Income
An ideal way to use real estate to accomplish your financial objectives and make a gift as well is to set up a charitable remainder unitrust.
What is a unitrust? Basically it is a trust in which you irrevocably place property, but retain a specified income, usually for life. At the end of the trust, the trustee distributes the property to the medical center. But because you set up the trust now, rather than leave the property through your will, you are entitled to a substantial income tax charitable deduction. By setting up a unitrust you can:
- establish an income for life—one that can grow with inflation;
- reinvest a highly appreciated, low-yield asset, without incurring capital gains tax;
- reduce income taxes significantly;
- gain the investment and administrative services of a trustee;
- get rid of the financial and personal burdens of property management;
- make a magnificent gift to GRMC’s future.
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