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, 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 the non-profit. 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, 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.
Please note: individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. The content in this Planned Giving section has been developed for West Virginia Public Broadcasting by Future Focus.