By Jackie Jacobs
Here are five questions for you:
If you answered yes to any of these questions, you may want to consider the following scenario:
Several years ago, Al and Helen Jones purchased a piece of land for $50,000. Today the property is paid for and commands a fair market value of $200,000. Al and Helen have paid property taxes for years on the land and now would like some income. They would like to sell the property and invest the proceeds, but the hefty tax on the gains holds them back.
Al and Helen are good friends of a certain charity and called the planned giving officer to request a visit. A few days later, during a conversation in their living room, the planned giving officer explains how they might use their real estate to fund a charitable trust that will avoid any tax on the sale of the property. What’s more, once the property is donated to the trust, the charity (the trustee) arranges for the sale and handles the investments according to the written directives of the trust document.
Al and Helen arrange for the trust to pay them, upon the sale of the property, a set percentage each year through semi-annual payments. They keep the payout percent at a reasonable level. This may permit the trust to grow in the future, thus providing a growing income as well. Since the property is donated to a charitable trust, Al and Helen receive an income tax charitable deduction that may reduce their income taxes this year (and perhaps in subsequent years).
After speaking with the planned giving officer, Al and Helen meet with their attorney and CPA. Receiving their blessing, they go forward with the gift. Today they are very happy. Not only do they receive added income, they also enjoy knowing that after they are gone the charity will receive a generous gift from the trust principal.
Like Al and Helen, you may own real estate that is paying little or no income. If you are interested in the possibilities of using real estate to make a charitable gift that produces lifetime income, discuss this with a planned giving professional and your counsel. It could be a win-win situation.
Article appears as originally published in the Ohio Jewish Chronicle, Thursday August 24, 2017.
Jackie Jacobs is the Chief Executive Officer of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters.