Our donors sometimes wonder if they should make a gift of real estate during their lifetime or wait until their passing (using a bequest in their will or living trust). While making a gift of real estate by bequest lets you retain control of the property should you need it to meet personal needs in the future, if you have other resources to rely on, there are definite advantages to accelerating your gift for you to consider. One significant advantage is that you will receive a federal and state income tax charitable deduction in the year you make the gift (see Tax Savings).
By giving your real estate to Roger Williams University (RWU) while you are living, you can experience the immense satisfaction of seeing your gift in action. RWU will promptly sell the property, and the cash proceeds will be immediately put to work as you desire.
Peace of Mind
Peace of mind comes from a lifetime gift in several different ways. One is knowing that the gift is made and that nothing will intervene to delay (or worse, negate) your transfer down the road. In addition, the executor of your estate will not have to worry about the property when you are gone. Otherwise, your executor, who may well be a friend or loved one, must step in and manage the property until it is deeded over to RWU.
Also, you are instantly relieved of ownership concerns and worries. No more management duties and responsibilities; no more real estate taxes or property insurance to pay; no more potential, however remote, for personal liability due to property conditions.
Tax Savings
As long as you have owned the real estate more than one year, you will receive an income tax charitable deduction in the year of the gift for the full fair market value of the property, even if it has grown in value since you purchased it. This means you can save on both federal and state income taxes immediately, giving you more cash to spend today on the things you need or want.
In addition, there will be no tax due on the capital gain in the property. This means that you will not only save on income taxes, but also do so with a deduction based partly on appreciation that was never taxed.
Income tax charitable deductions for gifts of appreciated real estate are limited to 30 percent of adjusted gross income in one year, but any excess deduction used over up to the next five years (used up to a total of six years).
EXAMPLE
Irv and Ann G. contribute real estate valued at $1,300,000 for which they paid $420,000 in 1987. If they were to sell the property, they would be taxed $132,000 on the capital gain (15% of $880,000). By contributing the property to RWU, they both avoid tax on the gain and receive an income tax deduction which saves both Federal and State income taxes of, perhaps $500,000 or more for a total tax savings of $632,000 which reduces the after-tax cost of Irv and Ann’s $1,300,000 gift to $668,000.
A gift of real estate during your lifetime is just one way to make an impact at RWU. Contact us to learn more about current gifts of real estate, gifts in your will or trust, and other ways to leave your mark.