Leaving property to charity builds a lasting
legacy. You may also receive tax benefits for your gift.
However, you should take steps to ensure your kind act is accomplished as you intended. Here is what you need to know.
Do you have the right to direct what happens to your gift in the future?
You have a special right as a donor. You not only can dictate what happens to your assets immediately after your death, but also far into the future. Do you want to be sure the Edward Hopper painting is enjoyed by future generations at your town’s small art museum? You can put restrictions on the sale of the piece. Do you want your land enjoyed as a public park? You can forbid development of the property in perpetuity. In order to preserve your intentions, you should include clear language that specifically directs its use.
Charitable trusts come with tax advantages
You are doing a good thing and deserve to reap a reward. The Tax Code offers benefits to donors to charitable trusts. The funds you donate to your charitable trust are not taxable income. You can also spread out the tax deduction over time and can, thus, strategize how to gain the most tax advantage from your gift. Because the charitable trust goes to the charitable beneficiary, the value is not included for purposes of your estate tax, and thereby benefits your other heirs as well. You might also be able to avoid capital gain taxes on certain contributions to the trust made during your lifetime.
Your family can first enjoy your property, then the charity
You want to support an important philanthropic cause, but you want to put your family first. A trust with a remainder interest with a life estate may be exactly what you need. For example, your spouse and children may be able to enjoy a vacation home throughout their lives before it is left to a camp or becomes a retreat center.
Leaving real property? What about the costs of upkeep
An institution may appreciate the gift of real property. However, the gift can be a double-edged sword if the organization doesn’t have the funds to pay for it over time. The extraordinary costs of insurance, taxes, maintenance, and repairs can quickly drain the budget, particularly of a smaller institution. If possible, consider leaving an endowment that can support the property you plan to leave.