Return To Programs Page      eClub One - Archive Articles List
 

We hope you enjoy the programs at eClub One

Reprinted By Permission - Copyright
Boulder Daily Camera
Making Money Matter
Enid Ablowitz

Column 60

May 2005

Tap Your Untapped Giving Potential

Would you like to give more?  Unlock the value embedded in your real estate.  While gifts of real property can be complex, they can be a part of your overall financial planning, and can give you the opportunity to make a difference through the non-profits in your life.

Real property is land and any permanent structures on it:  homes, apartment buildings, condos, vacation homes, office buildings, commercial and industrial buildings, farms, lots, mobile home and RV parks (excluding “tangible personal property” not permanently affixed to the land), and rights to natural resources, like trees, oil, gas, and minerals.     

Before you can give it, you have to know what you own.  Do you have all the rights, (as in fee simple), partial rights (as in shared ownership with a spouse or partner, or as in condominium ownership, leaseholds, or life estates), or indirect ownership through a general or limited partnership, S-corp, or C-corp?  Understanding the title to the property is critical to determining what mechanism to use to make a gift and the tax implications. Gift strategies also take into account any mortgages or liens.

Are you paying taxes on a lot or parcel of land you will never build on, or condo or vacation home you seldom use?  Are you tired of managing that apartment building with the hassles of tenants, leases, and late night phone calls when the heat goes out? Your equity in these properties can become part of a charitable giving plan.  You can take advantage of the tax laws to avoid capital gains tax you would have to pay on appreciation, get the charitable deduction for the market value, and simplify your financial portfolio, and your life.   

Giving the asset in its entirety to the non-profit is straightforward, if the property is free and clear and you have clear title.  In that case, a simple deed is all that’s needed.  Alternatively, to make the gift as part of your estate plan, specify the property and the charitable recipient in your will. In some cases, you may save estate taxes and a lot of headaches for your heirs.

Suppose you want to live in your home and also use it as a way to make a gift.  You can create a retained life estate.  The charitable deduction would be based on an appraisal to establish fair market value plus a determination of the present value of the remainder interest.

What if you want to sell a property that is subject to a mortgage, and make a charitable gift of your equity?  Consider a “bargain sale.” Sell the property to the charity at below market value, perhaps for the amount of the indebtedness.  The cash pays off the mortgage, and the charity sells the property at full market value to realize the gift.  You receive a charitable deduction equal to the difference between the fair market value and the sales price.  In bargain sales, charities may assume the debt, but the transaction is much more complex.

Charitable planning using real property assets can create an income stream for retirement, to support an elderly parent, or to create a safety net for a special needs child through a charitable remainder or charitable annuity trust.  (Annuity payouts are fixed payments. Remainder payouts are based on a fixed percentage of the value of trust.) 

For these and other sophisticated gift techniques, please seek professional legal and tax advice!

There are a few caveats about gifting real estate.  First, be prepared for a process that will take time and where there may be out-of-pocket expenses.  For example, the donor pays for appraisals to substantiate their charitable deduction.  There may also be legal expenses for title transfers as well as expert advice.

You may find that your favorite non-profit is reluctant to accept the gift, or has a committee that must evaluate the risk for the organization.  Risks can include things like the lack of internal infrastructure to handle complex gifts, marketability of the property, potential holding costs, EPA exposure, and other complications. You may wish to choose a mature organization that can handle your gift professionally. 

Lastly, clarity of communication and a well-written gift agreement between you and the non-profit is essential for a successful closing.  It will also assure that the proceeds from the sale of the real estate will be used for the purpose you intended.   

 Make a gift of real estate and you can make a difference.          

Now that you have completed this program, you have these options

To do BOTH use the Critique E-mail first, then return and click on the Make-Up Request Form

The content of programs appearing on the eClub One Make-Up website are the opinions of the authors and may or may not be shared by members of Rotary eClub One. These programs are presented by Rotary eClub One for use by site visitors, just as any program that might be presented at a Rotary meeting anywhere in the world.

© 2007 eClub One District 5450
Solution Services Inc