Real Estate and Tangible Personal Property
Residential and commercial real estate can create a generous charitable gift while achieving goals for financial and estate planning for you and your family.
Capital gains, estate and transfer tax exposure are often connected to transferring real estate either through sale or through an estate plan, except when the real estate is used for a charitable gift, which often reduces or eliminates any tax due on the asset.
Real estate can be given outright to the Foundation, or in the future through your estate plan, or can be used to fund a “life income” gift like a charitable trust or gift annuity.
Because real estate often creates a tax liability upon sale or transfer, and because multiple heirs cannot always agree on its use, considering a charitable gift of real estate often makes sense.
All gifts of real estate require the approval of the Foundation and acceptance is conditioned upon the terms of the Planned Giving Policy and Policy for Acceptance of Gifts of Real estate, including satisfactory status of title, appraisal and environmental review.
Other techniques can be used for using real estate as a charitable gift.
Remainder Interest Following a Life Estate
Donors that wish to give their residence or farm to Pen Bay Healthcare Foundation, but retain the right to live there, do so with a gift of a remainder following their life estate.
A donor creates a life estate by deeding real property to the Foundation while retaining the right to continue occupying the property. This allows the donor to take a charitable income tax deduction for the present value of the remainder interest and to avoid potential capital gains tax on the property's appreciation. Following the end of the donor’s life estate, the property can be sold. The proceeds of the sale may be used to provide general support or purposes the donor has indicated.
For example, Mr. And Mrs. Donor gift property with a fair market value of $500,000 to Pen Bay where they have received excellent care, retaining a life estate. They inherited the property and have a $50,000 basis in it. Mr. Donor is 71 and Mrs. Donor is 72. Based on actuarial data and interest rate projections from the IRS, the value of their charitable gift is more than $193,000. Subject to applicable limitation and a five-year carry forward, this is the amount of their income tax deduction.
Moreover, the property is removed from their estates for estate tax purposes, and Pen Bay Healthcare Foundation may sell the property and reap its full value after their life estates. The Donors incur no capital gain tax on disposal of the property.
Summary of benefits:
· Continued enjoyment of property for term of years or lifetime
· Income tax deduction when the gift is made
· Avoid capital gain on appreciated property
· Property removed from estate for estate tax purposes
· Pen Bay Healthcare Foundation can utilize full fair market value of the property in the future to support health care
A Bargain Sale can allow a donor to realize immediate income while allowing property to pass to charity. When a donor sells property for less than fair market value to the Foundation, he or she may receive an income tax deduction for the difference in the fair market value and the sale price to the charity. The donor can avoid some of the capital gain on the appreciation of the property, receive an income tax deduction and remove the property from their estate.
For example, you own a property valued at $500,000 and want to sell it to the Foundation for $350,000. Your income tax deduction in the year of the gift, with a five-year carry-forward, could be as much as $150,000, subject to any applicable depreciation adjustments. The property is removed from your estate, and any capital gains exposure is reduced. The Foundation is able to sell the property and use the net proceeds to increase access to and ensure quality of health care in our community.
Summary of benefits for donor:
· Immediate income generated from the Bargain Sale
· Income tax deduction in the year of the gift, can be carried forward 5 years
· Avoid at least a portion of capital gains on appreciation of real estate
· Removes property from estate for estate tax purposes
· Foundation can sell property for fair market value and dedicate the proceeds to support healthcare
If you would like to explore how a gift of real estate could help you and your family to achieve your personal financial and charitable planning goals, please contact the staff at (207) 594-6705 or firstname.lastname@example.org.
Tangible Personal Property
Pen Bay Healthcare Foundation may, in appropriate circumstances, accept gifts of tangible personal property such as medical equipment, works of art, boats, automobiles, furniture and other items. Generally, Pen Bay Healthcare Foundation will attempt to resell donated property. Therefore, gifts of items difficult to sell or limited value are not encouraged. Pen Bay Healthcare Foundation will not ordinarily accept gifts of property affected by substantial liens or limited in use or salability by restricting covenants, environmental concerns or other agreements. Similarly, Pen Bay Healthcare Foundation will not ordinarily accept gifts of partial interests in property such as partnerships or tenancy in common interests.
If you would like to explore how a gift of tangible personal property could help you and your family to achieve your personal financial and charitable planning goals, please contact the staff at (207) 594-6705 or email@example.com.
None of the foregoing is intended as estate, tax or legal advice of any kind. Your unique situation requires that advice of your independent, qualified legal, tax and/or financial advisor(s). Pen Bay Healthcare Foundation adheres to the Model Standards of Practice for the Charitable Gift Planner and the Donor Bill of Rights.