The common techniques for making gifts of real estate are each briefly described below. We would be happy to discuss with you which technique might be best for your particular situation and goals.
Transfer your real estate to us outright
This is the simplest way for you to give Walnut Hill School for the Arts a piece of real estate. By giving us all rights to your real estate, you will maximize your support of Walnut Hill, and you will earn an immediate income tax charitable deduction equal to the full appraised value of your real estate.
Sell your real estate to us for less than its appraised value
When you sell Walnut Hill your real estate in a “bargain sale” arrangement, you will enjoy several benefits. You will receive an immediate cash payment equal to the sale price and an immediate income tax charitable deduction for the difference between your sale price and the appraised value of your property. You will also avoid tax on some of your capital gain in the property.
Give your home to us, but continue to live in it as long as you wish
When you give your home to Walnut Hill subject to a “retained life estate,” you can continue to live in your home for as long as you wish, for the rest of your life, or for the lives of you and your spouse. You will earn an immediate income tax charitable deduction for a portion of the value of your home. You also can make a retained life estate gift using a second home, farm, or any structure you use as a personal residence, such as a boat.
Give your real estate now and receive variable payments for life
Using a gift arrangement called a “flip unitrust,” you can give your real estate now and start receiving payments as soon as your real estate has been sold. Your payments will vary with the value of your flip unitrust. Payments equal to 5% or 6% of trust value are typical. You will also receive a substantial income tax charitable deduction in the year of your gift. In addition, there will be no immediate capital gains tax on the sale of your real estate.
Give your real estate now and receive secure fixed payments for life
Using a gift arrangement called a “deferred gift annuity,” you can give your real estate now and receive payments of a fixed amount starting on the date you choose. The payment amount will depend on your age and how long after your donation payments will begin. Payments are backed by the general resources of Walnut Hill School for the Arts for life and may be partially tax-free. You also will receive a substantial income tax charitable deduction in the year of your gift and avoid or defer capital gains tax.
Give us a portion of your real estate holding
Rather than give us all of your real estate holding, you can give us an "undivided interest." For example, if you own 100 acres of farm land, you could give us 50 acres. You will receive an immediate income tax charitable deduction for the value of the portion you give. You will, of course, retain complete control of the portion of your real estate that you choose to keep.
Give your real estate through your estate
By making a gift of real estate through your estate, you will retain use of your property during your life. What’s more, you can change your gift plan whenever you wish, should your circumstances or priorities change. Putting your gift of real estate into your estate plan now will help ensure that your wishes will be carried out later. You may also save estate taxes.
Special considerations when giving real estate
Giving real estate to our organization requires some extra steps of which you should be aware. These steps include the following:
- You will need to establish the value of your property by obtaining a qualified appraisal. To be valid for claiming your income tax charitable deduction, your appraisal must be conducted no more than 60 days before your donation and no later than the due date, including extensions, of your next tax return.
- We will need to examine your property and conduct our own independent analysis of its value. For example, we will want to know if there are any debts, taxes, or liens owed on your property.
- Once we accept your gift of real estate, we could become responsible for cleaning up any environmental problems your property may have. This sort of cleanup could be very expensive. Therefore, before we accept any gift of real estate, we routinely conduct a review to make sure the property has no environmental issues.
Judy Ng owns several buildings in her hometown. While they have been a good investment for her over the years, she’s ready to stop being a landlord. Her properties have grown substantially in value, so she’s concerned that she will have a big capital gains tax bill to worry about if she sells them. She would also like to show her dedication to Walnut Hill School for the Arts by making a major gift.
One of Judy's buildings is appraised for $300,000. She purchased it for $45,000. Judy proposes that she donate it to Walnut Hill, which will eliminate her concern over capital gains tax. After performing our own review of the property, we confirm that the appraised value is accurate and that we have no environmental or financial concerns regarding Judy’s property.
- Judy receives an immediate $300,000 income tax charitable deduction.
- Judy saves $111,000 in income tax and $51,000 in capital gains tax.
- Judy is relieved of all responsibilities of owning the property.
- Judy gains the satisfaction of providing substantial support to Walnut Hill.