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Gifts of Real Estate

gifts-of-real-estate

Gifts of real estate can make a difference when you donate a home to Before Their Time. We accept different kinds of valued properties such as residential, land and commercial properties. We can help with your charitable giving by guiding you through your property donation process.

To respect the privacy of our supporters, Before Their Time's practice has always been to leave the disclosure of possible contributions up to the donors.

If you own real estate, then at some point in your life, as part of financial planning, you may have considered giving it to a friend or family member. An asset that you have had for generations can be a gift for generations to come.

By donating all or part of your property to Before Their Time, you may be able to reduce your capital gains tax, estate tax, receive an income tax deduction, and in certain situations you may even be able to continue to use or live on the property.

Some people gift real estate after they pass away, while others give it to their adult children to help them get a good start in life. Before Their Time makes it easy to donate real estate to charity. Best of all, your gift will support families of drug overdose victims pay for funeral expenses and obtain mental health therapy. If you donate property in it may also be used to create a memorial park.

You may learn more about our parks project here.

Make a Gift of Real Estate

You can really be there for Before Their Time by donating real estate to charity. The real estate gift of a home, land, commercial property or investment property also provides tax benefits. By selling the property at full market value, we generate income for the nonprofit and the net proceeds assist Before Their Time to help families stricken with grief.

By gifting your life estate you may qualify for a significant income tax deduction.

Benefits of Donating Real Estate To Charity

  • You will receive an income tax deduction for the fair market value of the property.

  • You may reduce or even eliminate capital gains taxes owed.

  • Your responsibilities as an owner are eliminated.

  • You will create a lasting gift for charity.

  • You may be able to make a real estate gift that provides a lifetime of income for you or a beneficiary.

What is a Gift of Real Estate Called?

A gift deed, or deed of gift, sometimes called a donation deed is a legal document transferring real property ownership between a person (the donor) and an entity or other people (the donee). Gift deeds are used to donate your property to a non-profit organization or charity. Gift deeds can help in donating money to charities and nonprofit organizations, and help you obtain an annual gift tax exemption.

How do I Make a Real Estate Gift?

donate-land-to-charity

Are you interested in making a real estate donation to us? If you or a family member wants to give your property as a gift to Before Their Time, you will need to contact us for our address, federal EIN and other information.

We make the process of giving your charitable gift as simple as possible! Generally, the transfer of property is done by the use of the Quitclaim Deed. You should always consult a qualified real estate agent, accountant and attorney before contacting us, to make sure planned giving is right for you.

How It Works

We know real estate. Having an attorney and a realtor on our board, Before Their Time has experience with real estate transactions. Our land program has raised net proceeds from real estate gifts, providing crucial support for our mission.

The transfer of ownership or transferring of any property is done by an executed or signed deed. Your gift is determined by the property's fair market value and can be avoid capital gains tax. It could also increase your tax deductions and increase your net worth if it was gifted.

We also own and manage memorial parks, in which you can dedicate a tree or a bench plaque.

Here's the Simple Process:

  1. You deed your property (such as a land, home, vacation home, commercial building or investment property) to Before Their Time.

  2. Before Their Time will sell the property and use the proceeds to support our programs that help families of drug overdose victims.

  3. In very limited cases we may not sell , instead using the the property to turn it into a memorial park to honor drug overdose victims, and then turn it over to a local town.

Forms Of Real Estate We Accept

A real estate gift could comes in a variety of different forms. Before considering some of the ways that our charity might structure gifts of real estate to maximize value, both for the donor and for us, we consider some of the opportunities and limitations of each transaction.

Personal Residences

personal-residences

For most donors, a personal residence is the only piece of property they will ever own. A personal residence is where people live, and often times where people want to continue to live. In instances where residents want to move, they cannot simply do so without having first secured another residence to live.

Some people, have lived in a home for many years and may be intimidated by the prospect of trying to sell their house to move to a retirement community. The image of strangers looking into their private lives, and the details of trying to coordinate the timing of the sale with the availability of the unit in the retirement community may all appear daunting to some.

Before Their Time is sensitive to these issues, by taking on the responsibility of selling the real estate gift to a new owner , and by remaining flexible in our timing, our charity can often create as much comfort as the financial and tax benefit for the donors, as they carry forward.

Land Donation To Charity

land-donation

Much of the real property in the United States, and many other parts of the world, is undeveloped land and will remain so for the foreseeable future. A crucial concern regarding raw land is its development potential and distinguishes it as a charitable income tax deduction in this type of gifting.

One issue about which charities and donors should be aware is the impact of "development" of an area. You may be paying property taxes on land that you cannot develop due to zoning issues. Zoning usually determines which tracts of land will change in the future, and some land will never be allowed to be developed. If you sell the land it may have tax consequences.

In this instance it may benefit you to donate your land to Before Their Time. You will qualify for an income tax charitable deduction equal to the land's value, in addition you are not required to pay capital gains tax on land donations through your real estate transfers.

Vacation Homesvacation-homes

Vacation spots, those places where we choose to spend our leisure time, may change over the years. Sometimes, people find just the right spot where they return year after year that may, become a second home.

Vacation preferences change, the place that seemed so appealing at one stage of life, in another might take on limitations that hinder them financially, or distract, from a desire to explore other vacation destinations. In other instances, may be used rarely, sitting empty for much of the year, and producing no appreciation benefit for the owner and having tax consequences.

Vacation homes, consequently, offer key potential opportunities for planned giving. Whether as an outright gift, or into some arrangement, entitling Before Their Time to use the property for a specific period of time during the year creating an annual exemption. Vacation homes can often turn a financial liability into a tax savings, depending on the donor's cost basis, of far greater benefit to the donor, and produce income to our charity at the same time.

Commercial Property

commercial-property

Commercial properties, such as, office buildings, strip malls, industrial parks, condominiums, mobile home parks, and so on, are often the most valuable type of donation. They often tend to be large (relative to houses), and carry a value well into the future.

Commercial property also produces income. In fact, as the new owner, holding on to the property makes more financial sense than trying to sell it. It is an investment for Before Their Time and does not, therefore, require a sale, in order to produce a cash flow to fund our charity. If it makes sense for tax purposes, contact us today and let us evaluate it.

What are the tax implications of gifting a property?

 According to the IRS, there are three key things you need to know to determine the tax basis of a property:

  •  The adjusted cost basis before the property was gifted.

  •  The fair market value of the property. 

  •  Any amount of gift tax that’s already been paid.

Charitable Income Tax Deduction Considerations

income-tax-deduction

Let's face it, the truth is that nobody enjoys paying taxes. When you donate your assets to charity, you may take tax deductions but there are charitable income tax deduction considerations to remember. Next we will take a look at different taxes including the gift tax, estate tax and capital gains tax to see how gifting real estate can affect how much taxes you pay.

The Gift Tax

This includes federal gift tax. When gifts are given without money changing hands to another party, the donation is considered gift by the Internal Revenue Service and subject to the gift tax rules. As of 2021, all permanent U.S. citizens have lifetime gifts tax exemptions of $11.7 million that allow the recipient to spend up to that amount during his lifetime. All assets given over this amount will be taxed. To take advantage of gift tax savings you would need to fill out a gift tax form, but many individuals are far below their lifetime exemption of $11.7 million, so they won’t owe any gift tax.

The tax consequences of owning an investment property, even as part of a living trust are important to consider. Unfortunately, your beneficiaries may end up with large bills, as part of your taxable estate, when they have not planned properly. Check with your accountant to find out the possibility of tax implications for the gifting of property, and determine how much this affects your gift tax.

Capital Gains Tax

Capital gains tax, although different from gift tax, may also cause considerable tax implications for real property gifts depending upon the manner in which they are made or the appreciation that occurs. The cost of a gift of an asset is usually determined from the donor's cost basis. In such an event the recipient can sell an asset, the capital gains and losses will be determined on its initial cost basis.

In inheritance, the property owner gets an increase in the cost basis of a taxable asset. As part of the taxable estate, if the owner keeps the property, he won’t be responsible for any capital gains taxes. But if he eventually sells the home for a profit, then he will be responsible for paying capital gains taxes on the difference.

Medicaid Considerations

There are other factors to consider with donating that affect Medicaid eligibility when you gift large assets, such as property. A financial assessment of the programs evaluations includes a five-year financial audit of your finances. Medicaid will seek donations made from the five-year period. During this period, donations will be accepted.

Can It Work for You?

A gift of real estate may be for you if:

  • You hold residential, commercial or undeveloped land that has risen in value and that you no longer wish to maintain.

  • You are concerned about paying taxes and the capital gains cost of selling the property.

  • The property is useful to our mission or is marketable, and it is environmentally secure.

  • Land that donors would like permanently protected. We are not able to protect all of the land that is offered to us as part of our parks project. The decisions to accept or decline land for preservation are made by Before Their Time's board of directors and are based on many factors, including features of the property and potential for future transfer of ownership (for example, to become part of a local community as a park). If you are interested in making such a gift, please contact Before Their Time to discuss possibilities.

Reliable Legal Counsel

Real estate law is, confusing to say the least. Like most specialties in the legal profession, it is a subject that requires a significant amount of education, training and experience. Real estate law is often governed by local jurisdictions that may impose zoning and utility restrictions and even accessibility requirements. It is very important to have legal council who is familiar in detail with the specific municipality within which the parcel is located.

Before Their Time recommends that you always use licensed real estate agents and attorneys.

Real Estate Agent

Most real estate transactions require two sets of real estate professional. The first has to deal with the transfer itself and any local issues related to that transfer. Many donation transactions also require an attorney familiar with the charitable and tax implications of the transfer. Real estate gifts come in all shapes and sizes with many complexities, that carry with them tax benefits and the charitable benefit. Most issues can be avoided through reliable tax council and a real estate professional prior to any signed agreements.

Partnerships With Professionals

In the past, charities and donors both have often been frustrated in negotiating charitable gift transactions by those situations in which the potential value of a piece of is significantly greater than its fair market value under current conditions. In many of these cases, professionals can eliminate these concerns, and help realize the parcels full value. This is true whether the end users are residents, commercial, industrial clients or charities. Remember to always partner with real estate professionals when gifting real estate.

Central Concerns About Gifting Real Estate

Although there are many specific issues that may arise with a potential donation of any parcel, there are three primary concerns that we need to take a look at before structuring a deal. This is to protect the donors and also Before Their Time, to make sure we can sell the parcel to maximize the benefit to our charity.

Fair Market Value Issues

Value, is in the eye of the beholder. Historically, the value of a piece of property is what a buyer would pay to a seller for that property, whether it's an individual or business. Simply put, something is only worth what a person or business is willing to pay for it.

This sounds great at first, but both willing buyers and willing sellers rarely can agree on value. Consequently, what one buyer might be willing to pay might be quite different from what another buyer might offer. When determining value of the property donated, it is best to get a professional qualified appraisal.

Two heads are often better than one. That is why professionals in the business of appraisals, will use at least two, and perhaps more, comparable properties to estimate the current fair market value. By securing more than one appraisal from a real estate professional, the family or business involved can rest assured that the estimation is fair.

The value for a piece of property may be quite volatile, and a gift of transaction will need to take that volatility into account as well as the tax benefit for the donor and estate tax. In the business of appraisals, professionals take into account what a comparable property can sell, or has sold for.

Installment Bargain Sale

An installment bargain sale produces a steady and constant stream of income to the donor for a fixed number of years with payments based on a percent of the initial fair market value. An installment bargain sale is an attractive alternative to the more widely used charitable trusts. As the name suggests, an installment bargain sale is a combination of traditional bargain sale agreement and an installment payment schedule.

They are, for example, the purchase by the charity of an asset for less than its fair market value, with payments made over a period of time. The donor can still receive a charitable deduction as well. An installment bargain sale can result in income much as a trust would, with a charitable deduction around the same as the trust.

As with charitable gift annuities for example, the avoidance of part of the capital gains tax, with the remainder of the capital gains spread over the term of the payments. Just like charitable gift annuity payments, installment bargain sales result in regular payments to the donor. A portion of these payments will be taxed at favorable capital gains rates. The income to the donor may result in less tax than would be the case with a traditional charitable trust.

Conclusion

Real property comes with both highly lucrative potential and significant and potential liabilities as well. We understand that every gift is unique and while real estate gifts sometimes present significant challenges to donors, family, and charities alike, the benefit to everyone involved makes meeting these challenges worth the effort.

Real estate as a gift is worth pursuing. Before Their time will need to asses the condition, location, property's value, and terms before accepting a donation. With some planning, what might otherwise have appeared to be an obstacle, might enhance the value of the property to sell for our charitable purposes, or even for the donor or the donor's family as well with income tax deduction.

donate your property

Donate your property. Get in touch today

We are here for you to talk through your choices of personalized gift of real estate for you to develop your philanthropic goals of giving real estate. Get in touch with Before Their Time to begin your adventure today.

Before Their Time's Policies For Accepting Gifts Of Real Property

The following policies shall govern the acquisition by Before Their Time of gifts of real property. The Board of Directors of Before Their Time reserves the right to make exceptions to these policies.

1. A gift transaction shall be consistent with the mission of Before Their Time and will not damage the foundation's image or reputation.

2. Neither the acceptance nor subsequent sale of the gift parcel of real property shall produce a substantial burden on either the staff or directors of the Before Their Time.

3. Neither the acceptance nor the subsequent sale of the gift parcel of real property shall create a taxable event for the Before Their Time nor shall such acceptance or subsequent sale in any way impede the nonprofit status of Before Their Time.

4. Before Their Time shall require the donor, at the donor's expense, to secure an independent appraisal of the subject gift parcel by an MAI appraiser who regularly engages in the business of real estate appraisals within the jurisdiction where the property is located. Before Their Time, in its sole discretion, may elect to accept the valuation resulting from the donor's appraisal, or may secure its own appraisal of the property.

5. Before Their Time shall obtain as much information as possible regarding the market conditions for the property's subsequent sale.

6. A member of Before Their Time's staff shall physically inspect the parcel of real estate to be given to us before we accept the proposed gift.

7. Before Their Time shall secure title insurance in the full amount of the value of the gift parcel of real estate.

8. Before Their Time shall not accept outright gifts of real property with a present fair market value of less than $100,000.

9. Before Their Time shall not accept a gift of real estate that is encumbered by debt unless either: a) the donor enters into a written agreement with us to retain responsibility for the debt; or b) the real estate i) produces income sufficient to pay the debt obligation under the terms of the debt instrument, ii) the remaining life of the debt is less than ten (10) years, and iii) the debt is not greater than twenty-five percent (25%) of the fair market value of the subject real estate.

10. All transactions shall be structured in a manner that will provide Before Their Time with the maximum flexibility for the subsequent sale of the real estate.

11. In accordance with the policies set forth herein, Before Their Time may accept the remainder interest in property where the donor retains a life estate for one or more lives in the gift real estate, subject to the conditions that: a) the life tenant shall be responsible for maintenance, utilities, real estate taxes, and all appropriate insurance; b) that the life tenant shall not commit waste; c) that the life tenant shall not permit liens to be placed on the property or in any way obligate Before Their Time to the life tenant's creditors; and d) that the remainder interest in the property shall ultimately pass debt free to Before Their Time.

12. Subject to the policies set forth herein, Before Their Time accepts gifts of real estate.

13. Legal title to all real property conveyed to Before Their Time shall be held in the name of Before Their Time or shall be conveyed to a trust of which Before Their Time is the ultimate remainder beneficiary.

14. Before Their Time assumes no responsibility for providing financial, investment, or legal advice to donors bu encourages all prospective donors to seek independent financial, investment, and legal advice prior to entering into any transaction with us.

15. Before Their Time will not pay a commission on the occasion of a gift of real estate to us. Reasonable commissions may be paid only upon the subsequent sale of the property.

Adopted this 9th day of February, 2022 by the Board of Directors.

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