Leveraging Real Property to impact Seton Hall Law
From undeveloped land and timberland to vacation residences and rental properties, a gift of real estate can unlock the full value of your property and offer special economic advantages. If you own property not subject to a mortgage that has appreciated in value, a charitable gift to Seton Hall Law School may be an attractive proposition. The following options are frequently used for charitable giving:
- An outright gift of appreciated property offers maximum tax advantages because the charitable deduction is generally based on the full fair market value of the property. An appraisal is needed for IRS purposes.
- A gift of the remainder interest in your home or farm (called a “retained life estate”) can provide a current tax deduction, avoid capital gains taxes, and allow you to continue to live in your home.
- A gift (or partial interest) of appreciated property can be used to create a charitable remainder trust, which will provide you (and/or you and a second beneficiary) an annual income for life.
Why Fund a Charitable Gift with Real Estate?
Unless you sell the property, your options for receiving current financial benefits from the real estate are usually limited to increasing your debt or renting the property to someone else.
Real property can also be a nuisance for estate planning, since it is rarely practical to transfer a single property to more than one heir. The result is a choice between leaving inequitable benefits for heirs or placing the burden—and costs—of selling the property onto your executor and estate. Property located in different states may be subject to additional probate and transfer costs. This problem is exacerbated if the property was income producing and depreciated.
Make an Outright Gift
You may deed your property to Seton Hall Law and gain an income tax deduction for the appraised value of the property. You may then designate how the proceeds are to be used by the Law School if you wish.
Give Your Property and Continue to Enjoy It
The retained life estate agreement is an opportunity to continue living in or using your home, vacation property, while also establishing a gift now—and to enjoy the benefits, including current tax savings, that usually characterize only lifetime charitable gifts. The retained life estate arrangement may generate a sizable income tax deduction for you in the year you establish the gift. At the end of the retained life estate term (usually your lifetime or joint lifetimes), the property goes to Seton Hall Law as the charitable recipient. The donor is responsible for all taxes, maintenance, etc., on the property during their lifetime.
A Gift that Yields an Income Stream
It is possible to generate or replace income from real property (while avoiding or reducing capital gains taxes on the sale of the asset) through a charitable remainder trust. In this scenario, the donor must put the property into a trust before there is a signed purchase offer on the property by a third party.
There are a number of ways in which to utilize appreciated real property to make an impact at Seton Hall Law. Other restriction apply, so contact our office at 973-642-8711 to learn more.