Real estate gifts can help property owners meet their own needs as well as support the College. And real estate can be a key element in overall financial planning.
There are two kinds of real estate gifts, outright gifts and retained life estate gifts.
Retained Life Estate
Retained life estate gifts provide benefits to both the donor and the College. In this arrangement, a donor contributes real estate—typically a primary residence or vacation home—to the College and retains use of the property during his or her lifetime. The donor receives an immediate tax deduction, and the property is excluded from his or her taxable estate. Currently, the tax benefits provided by a gift of retained life estate are at historically high levels.
A 75-year-old donor creates a retained life estate with a primary home valued at $500,000 in October 2009. She receives a tax deduction of $333,333 and can remain in her home as long as she chooses. The 2009 deduction is 26% higher than it was just two years ago, because interest rates are so low.
In a retained life estate, the you continue to maintain the property and to pay property taxes. You can give up use of the property at any point. At that time, you would no longer be responsible for taxes or maintenance and would receive a further charitable income tax deduction.
- You receive gift credit and an immediate income tax deduction for a portion of the appraised value of your property.
- You can terminate your life estate at any time and take an additional income tax deduction.
- You have the satisfaction of making a significant gift now that benefits Middlebury later.
If you no longer use a vacation house or other property, an outright gift can provide significant benefits. You can deed your property (home, vacation home, commercial building, or investment property) to the College. The College may use the property for educational purposes or, more likely, will sell it and the use the proceeds from the sale to support students and faculty.
- You receive an income tax deduction for the fair market value of the real estate, no matter what you originally paid for it.
- You pay no capital gains tax on the transfer.
- You can direct the proceeds from your gift to a specific College program.