Did you know that you can supplement your retirement with a partial (or full) gift of Real Estate? You can!
One of the many ways to support the causes you care about is to give the gift of real estate. This can not only considerably enhance your giving power, but also provide great tax benefits. There are multiple ways to donate property, but this piece will focus on how to place it in a charitable remainder unitrust (CRUT). A unitrust is an excellent vehicle for gifts of real estate, because the trust is tax exempt and does not pay capital gains tax when it sells the assets. CRUTs will pay you income for your gift, and still allow you to make a lasting impact.
Here’s how it works: When the unmortgaged property is transferred to the trust, the trustee sells the property and invests the proceeds. The invested proceeds provide you, or any recipient you name, with payments for life. Or if you prefer, any length of time you specify, up to 20 years. At the end of the trust term, the remaining assets are distributed to the non-profit for the purpose you designate.
Build a legacy: Once you’ve decided to support an organization with a charitable gift of real estate, it’s up to you to determine the nature of your gift and where you’d like it to go. You may choose to make a one-time gift to support an immediate opportunity, or you may want to create an endowment that lasts forever. The endowment will create a personal legacy. The organization only spends the earnings generated by your principal donation, never the principal itself. Therefore, an endowed gift ensures that the people of Hawai‘i will benefit from your generosity for endless generations.
Organizations, such as Wilcox Hospital Foundation through their office of planned giving (firstname.lastname@example.org), can not only help you set-up a CRUT with your Kaua‘i investment properties, but also your Mainland properties.
Building for the Future with Gifts of Real Estate
A unitrust is an excellent vehicle for gifts of real estate, because the trust is tax exempt and does not pay up-front capital gains tax when it sells the assets. The full sales proceeds remain in the trust to provide a payout to the income beneficiaries. You can establish a charitable remainder unitrust by transferring your property to a trustee (in this case, a non-profit organization), who then invests the trust’s assets and pays you an annual income. At the end of the trust term, the remaining assets are distributed to the non-profit for the purpose you designate.
When you create a Charitable Remainder Unitrust (CRUT) you’ll benefit – along with the people of Hawai‘i.
Here are the key benefits to you:
- Receive an immediate income tax deduction
- Pay no up-front capital gains tax on property that is donated
- With 1031 exchange properties that are free of debt, exit without paying capital gains on the sale
- The satisfaction of making a significant gift that benefits you and your family now and the charity of your choice later
- Eliminate the burdens and costs of ownership, including maintenance, property taxes, and insurance
How it Works:
- Create a trust, either for a term of years or for life
- Transfer assets to the trust (funded through real estate)
- The trustee sells the asset and reinvests the proceeds
- The trust pays you an income or annuity each year
- After the trust ends, the remaining assets go to the charity of your choice
Here’s a scenario:
Here is a chart to break down how it would look by the numbers.
With a CRUT, you receive a charitable deduction of $192,199 and no capital gains. Plus your CRUT pays you $42,000 a year and you are a hero in the community.
For more information feel free to call Andy Bestwick. He’s the Director of Wilcox Health Foundation.
808-353-1217 or email@example.com