Four Ways to Give Real Estate

With interest rates low and the real estate market booming, many people are finding that their real estate holdings are becoming more valuable. Other investments may be down, but real estate values are rising.

This has created an unusual opportunity for using a building, raw land, or even a vacation property to fulfill one’s philanthropic dreams. For example, taxable property that has appreciated in value can be given without incurring tax on the appreciation. Thus, the value of the gift may be substantially more than it might be were the property first sold and the after-tax proceeds then given to charity.

If you have appreciated real estate—especially property you are no longer using—you may want to consider the benefits of using this asset to make a charitable gift. There are several ways you can proceed, and here are four possibilities to consider:

1. Give the Entire Property.
Since Saint Leo University is a qualified charitable organization, it can sell real estate gifts without incurring tax on the appreciation. For example, in 1980, Mr. and Mrs. X purchased a lot for $10,000. It was recently appraised at $50,000. If they sell it, they will have to pay tax on the appreciation. However, if they give the deed to Saint Leo University, they will be free of the tax and also escape the hassles of having to sell the property. They will also receive a charitable income tax deduction for the appraised value of the property.

2. Give a Portion of the Property.
Many people cannot afford to give an entire parcel of real estate, but they can give part of it. A good solution is to give an undivided interest in the property, say 50 percent. Saint Leo University then works with the donor to market and sell the property. Each party—the donor and Saint Leo University—then receives one-half of the proceeds from the sale. A bonus for the donor is that he or she can use the income tax charitable deduction for the gift portion to help offset any taxes due on the other portion.

3. Give the Property and Obtain Income.
Some real estate owners need additional income. Yet they also want to make a major charitable gift to Saint Leo University. One possibility is to use real estate to establish a charitable trust. The trustee will then sell the property and invest the proceeds in a balanced portfolio that will provide income to the donors for as long as they live. After they are gone, whatever is left in the trust will go to Saint Leo University. There are several advantages to this approach, and it may be a good solution if you have appreciated property, need additional income, and want to help Saint Leo University in the process.

4. Give Your Home and Keep Living There.
Some donors want to make a major gift to Saint Leo University by giving their homes. However, they still need a place to live, so they arrange what is called a life estate gift. This simply means that they give their residence to Saint Leo University, obtain a charitable income tax deduction, and retain the right to live there as long as they want. This arrangement removes the property from their estate and relieves them or their personal representatives from having to dispose of the house later.

The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes include federal taxes only. State income/estate taxes or state law may impact your results.