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 a taxable capital gain
because when I'm gone the trust goes to charity.
The trust takes 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, is 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 Los Angeles City College, 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.
