Gifts of Real Estate

Philanthropy and Real Estate

When you consider making a charitable gift, you have many options as to what assets 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 market 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 current market 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? The donor irrevocably donates assets, in this case appreciated real estate, to the charity in the form of a unitrust. The donor works with the GRMC development office of the charity along with an attorney to prepare the trust document. The donor receives an agreed rate of return in the form of an annuity payment during their lifetime and or the lifetime of one or two beneficiaries. Each year the annuity payment is calculated based on the value of the trust at the end of the year.

By setting up a unitrust, you can:

• Establish an income for life—one that can grow with inflation
• Donate an appreciated, asset, without incurring capital gains tax
• Minimize income taxes
• 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