Land can be the greatest gift of all, especially here in the heartland. It’s a sad reality, then, that the costs of land can grow through one generation’s lifetime to become a significant tax burden for the next, especially if there is no one to take over the land and it needs to be sold. What do you do when the land you’ve loved so much threatens to be a financial burden for your family? Consider a donation to Habitat. It can benefit our mission and reduce taxes for your family.
While you can donate land and property to many charitable causes, it’s extra special for Habitat. That’s because finding land is the first step in our building process. We know how valuable it is. Whenever possible, we’ll use the gift to repair and build new houses for local, working-class families. The land will continue to serve as a firm foundation for the community and the next generation.
Gifts can include undeveloped land or residential and commercial property. We accept them in a variety of ways:
This is the simplest way to make a gift during your life. Do you have real property that you’d like to give away now? Simply transfer the property to Habitat. You’ll pay $0 in Capital Gains Taxes when gifting the property to Habitat, and you get the charitable deduction for full market value of the property. Depending on where your property is located, Habitat may be able to build a house or may decide to sell the property and use the proceeds to further our mission. It’s a win-win.
What if you would like to give your home to Habitat, but you still need to live in it for your life or a set number of years? Or what if you have other real property that you’d like to give to Habitat, but you still need to be able to retain the income from the property for your life (think farm, vacation, or rental property)? A Life Estate may be your best option.
This will allow you to ensure that you can retain control and use of the property during your life and that Habitat will receive the property at your death with little transfer costs. This transfer also avoids probate court and still gives you a charitable deduction on your income taxes that can be carried over for 5 years if not used in full.
What if you need to sell property that is highly appreciated in value and are looking for ways to benefit Habitat and pay less in taxes? Consider a Bargain Sale. This allows you to sell the property to Habitat for less than fair market value and in return you will pay less in Capital Gains Taxes and receive a charitable deduction for the amount of the gift. Bargain sales put more money in your pocket and in Habitat’s pocket.
What if you have property that you do not need the income from anymore that just increases your income and estate tax exposure, but you would still like to pass the property to your children eventually? Then you may want to consider a Charitable Trust. In this case, a Charitable Lead Trust. Alternatively, if you and/or your children still desire to get an income stream from the trust for a set number of years or for life, then a Charitable Remainder Trust may be a better fit.
These trusts sound complicated, but when you are working with a professional, they are easy to put together and understand. The best part is that they provide a more flexible framework to allow you to maximize your tax savings (think income, estate, and capital gains taxes) and benefit Habitat at a far greater level than you would have without the trust. These trusts can be used with other assets as well (retirement accounts, investment accounts, stocks, bonds, etc.).
A Bequest or Specific Distribution is the simplest way to make a gift at your death. Of course, there is no lifetime impact to Habitat or to yourself when you make a gift at death. However, if you have a taxable estate, there may be potential estate tax benefits. Simply name Habitat in your Will or your Trust to receive a portion of your estate or a specific property.
We recommend, but do not require, that you discuss any bequests or specific distributions with Habitat prior to making the gift to make things easier on your beneficiaries and on Habitat. For example, did you know you can direct the funds? Do you want the proceeds to be used towards building a house? Education programs? Or for our amazing staff and team? These are all questions we want to be sure to ask to ensure your gift is utilized as you intended.
Please consider this information as a starting point. With all charitable gifts, it is important to consult with your attorney or financial advisor to ensure that you comply with state laws, receive maximum tax benefits, and that your wishes are accurately reflected in necessary legal documents. We would be happy to meet with you throughout this process and provide recommendations on where to begin.
Questions? Contact us.