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Transforming Realty to Gift Reality
Want to make a gift to charity without touching your bank account? Consider giving real estate, such as a personal residence, vacation home, farm, commercial property, or undeveloped land. When you make a charitable gift of appreciated property you have held longer than one year, you qualify for a federal income tax charitable deduction, and you may minimize or eliminate capital gains tax. In some cases, you can even avoid dealing with that property’s maintenance costs, property taxes, or insurance.
Another benefit: This may also avoid some of the hassle of selling the real estate. You can either deed the property to the charity or to a charitable trust during your lifetime or ask your attorney to add a few sentences in your will or other estate documents.
Ways to Give Real Estate
It is important to speak to the Museum first if you are considering such a gift. The following is general advice about giving real estate to charity, and any such gift will depend on the property, your situation, and the Museum’s needs:
An outright gift+
When you make a gift today of real estate you have owned longer than one year, you qualify for a federal income tax charitable deduction equal to the property’s full fair market value. This deduction lets you reduce the cost of making the gift and frees cash that otherwise would have been used to pay taxes. By donating the property to a charity, you also eliminate capital gains tax on its appreciation. Please contact the Museum to discuss the specific property and to consider the best charitable options for you.
A gift in your will or living trust+
A gift of real estate through your will or living trust allows you the flexibility to change your mind and the potential to support our work with a larger gift than you could during your lifetime. In as little as one sentence, you can ensure that your support for the Museum continues after your lifetime. To find the best language to use for such a bequest, please call the Museum. It all begins with a conversation.
A donor advised fund+
When you transfer real estate to your donor advised fund, you avoid capital gains taxes and qualify for a federal income tax deduction based on the fair market value when you itemize your taxes.
A deferred charitable gift annuity+
Are you tired of the hassles of maintaining your property such as paying taxes, utilities, and repair bills? Consider donating the property to the Museum in exchange for reliable payments for life for you (and someone else, if you choose). When you arrange a charitable gift annuity, you receive a federal income tax charitable deduction in the year you set up the gift annuity when you itemize on your taxes. If you use appreciated real estate to make a gift, you can usually eliminate capital gains tax on a portion of the gift and spread the rest of the gain over your life expectancy. A gift of unmortgaged property to fund a deferred gift annuity is preferable and generates the greatest tax benefit.
A retained life estate+
Perhaps you like the tax advantages a gift of real estate to charity would offer, but you want to continue living in your personal residence for your lifetime. Depending upon the property, you may be able to transfer your personal residence or farm to charity but keep the right to occupy (or rent out) the home for the rest of your life. You continue to pay real estate taxes, maintenance fees, and insurance on the property. Even though the charity would not actually take possession of the residence until after your lifetime, since your gift cannot be revoked, you qualify for a federal income tax charitable deduction for a portion of your home’s value.
A charitable remainder unitrust+
You can contribute to charity any type of appreciated real estate you’ve owned for more than one year, provided it is unmortgaged, in exchange for an income stream for life or a term of up to 20 years. The donated property may be a residence (a personal residence must be vacant upon contribution), undeveloped land, a farm, or commercial property. Real estate only works well with certain variations of charitable remainder trusts. Your estate planning attorney, who will draft your trust, can give you more details.
A bargain sale+
When you make a bargain sale, you sell your property to charity for less than what it is worth. The difference between the actual value and the sale price is considered a gift to the charity. A bargain sale can be an effective way to dispose of property that has increased in value, and it is the only gift that can give you a lump sum of cash and a charitable deduction (when you itemize) at the same time.
A charitable lead trust+
This gift can be a wonderful way for you to benefit charity and simultaneously transfer appreciated real estate to your family tax-free. You should consider funding the charitable lead trust with real estate that is income-producing and expected to increase in value over the term of the trust.
A memorial or endowed gift+
A gift of real estate may be a perfect way to honor your loved one in perpetuity. When you make an endowed gift of real estate, the proceeds from the sale of the real estate becomes part of the charity’s endowment. An annual distribution is made for the purpose you designate. Because the principal remains intact, the fund will generate perpetual support.
An Example of How It Works
Janet purchased a rental property years ago and has watched it grow steadily in value. Still active in her career and traveling frequently, she is beginning to find management of the property more and more of a hassle. Janet sees this as an opportunity to give her rental property to a charity that is important to her while realizing valuable tax benefits.
Janet avoids capital gains tax on the appreciation and qualifies for a federal income tax charitable deduction for the property’s fair market value. Janet loves knowing that the gift of her property will make a big difference supporting our mission.
View and download your FREE guide Ways to Donate Real Estate.
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This comprehensive estate planning kit helps you protect your family and establish your legacy. FREE!
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