Gifting real estate to charity has multiple benefits for the donor and there are several options a donor could consider. Generally, a gift of real estate could be either a principal residence, vacation home, a farm, a commercial building, a subdivision lot, or even unimproved land.
The benefits of gifting real estate:
- Receive an income tax deduction for the full market value of the real estate.
- Avoid paying capital gains taxes on the appreciation built up in your property.
- Donate outright or establish a gift that pays you an income—or both.
- Support the Club in your community that you are passionate about.
- Leave a legacy by impacting future generations of children in your community.
To optimize these advantages, the donor should own the real estate for at least one year, and the property should not have a mortgage or any other debt.
There are many ways real estate can be gifted to charity, and I will briefly cover five common strategies.
- An outright gift of real estate—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. You receive a charitable tax deduction from income taxes for up to 30% of your annual income, with excess donations carried forward up to five years. By donating the property to the Club, you also eliminate capital gains tax on its appreciation.
- Real estate gift through your will—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 and at no cost to you now. With a simple codicil, you can ensure that your support for our Club continues after your lifetime.
- Real estate gift to establish a Charitable Remainder Trust—You can contribute any type of appreciated real estate you have owned for more than one year, provided it does not have a mortgage, in exchange for an income stream for life or a term of up to 20 years with a charitable remainder trust. The donated property may be a residence, undeveloped land, a farm, or commercial property. You must work with an estate planning attorney, who will draft the CRT.
- Retained Life Estate—Perhaps you like the tax advantages with a gift of real estate, but you want to continue living in your home during your lifetime. With a retained life estate, you can transfer your personal residence or property to our Club and keep the right to live in your home for the rest of your life. Under this option, you would continue to pay real estate taxes, maintenance fees, and insurance on the property. The Club would not actually take possession of the residence until after your lifetime. But because this is an irrevocable gift, you qualify for a federal income tax charitable deduction.
- An endowed gift of real estate—A gift of real estate may be a perfect way to honor your loved one in perpetuity. By making an endowed gift of real estate, your contribution is invested with and becomes part of our endowment. With an endowment gift, each year a distribution is made supporting the Club for the specific purpose that you designated (if applicable). The principal remains intact within the endowment, which means that your support will continue in perpetuity.
The concept of gifting real estate is easy enough to understand, but it should be considered a complex gift. You should work with the Club directly to determine if your property is eligible for acceptance as well as your professional advisors to best determine is this is an appropriate strategy for your specific situation.
Jay is the founder and CEO of Launch Legacy Consulting, LLC. He has over twenty-six years’ professional experience, sixteen in the financial services industry as a financial/insurance advisor for individuals, families, businesses, nonprofits and school systems.
Disclaimer: This communication does not constitute legal, tax, or financial advice, which we do not provide. Please consult professional advisors concerning the legal, tax, or financial consequences related to your charitable planning.
A legacy gift is a way for you to develop a long-lasting positive impact on Ocoee Region youth. Often called planned giving, your legacy gift helps ensure future generations of youth will have the programs, resources and guidance to help them achieve academic success, grow in character and citizenship, make healthy life choices, and foster the creativity and skills they need to reach their full potential. To learn more about Legacy Giving options, explore our Great Futures Legacy Giving Society or call 423-559-8299 today!
