November 7, 2018

Real estate is one of the biggest assets for individuals reaching retirement or in retirement. Real estate can include a home, investment property, vacant lot or perhaps a farm. However, property ownership can come with some unexpected financial difficulties.

For example, some real estate produces little or no income. Additionally, selling highly appreciated property might result in a hefty capital gains tax. Luckily, there are ways to use your property to generate income and avoid paying higher taxes.

If you’re looking to sell real estate that has appreciated in value, one option to consider is a sale and charitable remainder unitrust. This involves transferring some of your property to a charitable remainder unitrust. When it’s time to sell the property, the proceeds are divided between you and the unitrust. You receive cash from the sale immediately and income from the unitrust later.

The unitrust allows you to bypass capital gains taxes at the time of the sale on the portion held in the trust. While there may be some capital gains on the portion of the property you hold and sell, the charitable income tax deduction you receive from the unitrust can offset most or all the capital gains tax due. 

Once the property sells, the trust can pay you and a loved one an income stream for life at a rate between 5 and 7 percent. The Texas A&M Foundation’s Office of Gift Planning staff can show you what your payments might look like. After a lifetime of payments to you, any remaining funds in the trust will be used to support an area of your choosing at Texas A&M.

When contemplating a donation of property to the Foundation, you’ll want to think about how much you used the property, how much it has appreciated over time, and what the tax consequences and costs would be should you sell rather than donate.  

To gain the most from value from you gift, here are some properties to consider donating. 

Highly Appreciated Properties 

As communities expand, agricultural land surrounding it often soars in value. If you own highly appreciated agricultural land, you may hesitate to sell it considering the substantial capital gains taxes you would owe. Donating highly appreciated properties – such as agricultural land or homes in cities where property values have skyrocketed – can be a wise choice. 

Investment Properties 

Like many people you many have invested in residential rental properties or commercial properties to provide supplemental income. Over the years, property maintenance, finding renters, collecting rent and paying taxes on the properties may have become too much trouble. By placing these properties into a charitable remainder unitrust, you can receive the lifelong income stream you desire while avoiding the headaches of property ownership.


How You Can Give Your Real Estate:

Sale & Unitrust

  • You transfer a portion of the property to a trust and then the property is sold.
  • You receive some cash proceeds from the sale. The funds in the trust are invested to pay you income for life.
  • You receive a charitable income tax deduction based on a qualified appraisal of your real estate.

Charitable Remainder Unitrust

  • You transfer your property to a trust that sells it tax-free and reinvests the profit to produce income.
  • You can receive income from the trust for life or up to 20 years.
  • You receive a charitable income tax deduction based on a qualified appraisal of your real estate.

Unused Properties 

You may own unused properties such as residential lots, undeveloped land or vacation properties that you no longer use but that still require maintenance and tax payments. Consider donating these types of properties to benefit Texas A&M.  

Charitable planning techniques can help you sell your property in a tax efficient manner and support Texas A&M. Please call or email us to find out the best plan for your needs and financial goals.