Real Estate Donations

Donating land or other real estate to charity is a powerful way to make a lasting impact on Children’s Health℠ while simplifying your estate planning. If you’re interested in learning more about donating land or real estate to charity, please find below the three most popular ways to do so:  

1. Donate your property directly to Children’s Medical Center Foundation  
2. Put your property into a Charitable Remainder Trust to earn lifetime income  
3. Retain your rights to your home while donating it to our organization    

If you have any questions about gifts of real estate, please contact us. We would be happy to assist you and answer any questions you may have.   

How to donate land or real estate to Children’s Medical Center Foundation 

Donate land or other real property directly   

Donating real estate directly to Children’s Medical Center Foundation is when the deed or title is transferred from a donor to Children’s Medical Center Foundation. You can donate land if your property is easy to market, debt-free and you’ve held onto it for over a year. We also recommend that the property is highly appreciated as donating your real estate to a charity like Children’s Medical Center Foundation helps avoid capital gains tax.

When donating land directly to Children’s Medical Center Foundation, we will often sell the land and use the proceeds to fund Children’s Health programs. On occasion, the Foundation might keep the land to generate income or use it for operations.   

You may also be eligible for a tax deduction. This deduction will be equal to the fair market value of the donor’s property and may be carried forward for up to five years. As the donor, you also avoid capital gains tax implications which you may have to pay if you decided to sell your property instead.  
  
Use-case example of donating real estate to charity as a direct gift: At the age of 50, Taylor has some farmland that has a fair market value of $100,000. Taylor signs the deed of the farmland transferring ownership to Children’s Medical Center Foundation. Taylor is now eligible for a tax deduction for donating land to charity that is equal to the fair market value of the farmland.  

Put your property into a charitable remainder trust to receive lifetime income  

Another way to donate land to charity is to establish a charitable remainder trust (CRT). With a CRT, you can donate real estate to Children’s Medical Center Foundation and receive income from the property for life or a term of years. This is a great option if you currently receive an income stream from an income-producing property like a rental apartment but no longer wish to take on the burden of management or are looking for an alternative to a 1031 exchange. At the end of the trust, the proceeds from the real estate used to fund the CRT go directly to Children’s Medical Center Foundation to support our mission. The minimum for creating a CRT with Children’s Health is $250,000.

A CRT can benefit the donor, a loved one, and sometimes multi-generational family members to help build a legacy. To set up a CRT using real estate, the property is first transferred into the trust and later put on the market to be sold. The proceeds from the sale are then invested for the lifetime of the trust. Distribution from a CRT can be monthly, quarterly, or annually, based on the donor’s preference and is a fixed percentage, typically between 5-8%.  This fixed percentage but variable distribution helps to increase the value and payments over time along with inflation. After creating a CRT, the donor is eligible to receive a tax deduction for donating real estate to charity and can be used for tax reduction purposes over a 5-year period.  

Properties that qualify:  

• Rental properties  
• Commercial buildings  
• Second homes  
• Vacation homes  
• Vacant lots  
• Apartment buildings  
• Farmland  

Use-case example of donating real estate to charity through a charitable remainder trust: At the age of 70, Taylor has created a CRT to donate land valued at $250,000 to Children’s Medical Center Foundation. Distribution from the CRT to Taylor is a fixed percentage of the value of the property at 5% every year. During the first year, Taylor will receive $12,500 annually or $1,042 monthly. Each subsequent year, the value of the trust will be recalculated with the hope that the annual payment will increase over time. At the term of the trust, the remaining funds will be distributed to Children’s Medical Center Foundation to make life better for children.  

How to donate real estate through a retained life estate  

You may desire to leave your home or farm to Children's Medical Center Foundation at your death but would also like to receive a current charitable income tax deduction. A retained life estate gift might offer the solution you need.  

To gift your home through a retained life estate, you deed your home or farm to Children's Medical Center Foundation. The deed will include a provision that gives you the right to use your home or farm for the rest of your life and that of any other life estate party named in the deed. Then you and Children's Medical Center Foundation sign a maintenance, insurance and taxes (MIT) agreement to explain that you will do your best to keep the property in good condition and that you will maintain property insurance and pay the property taxes. When the owners of the life estate have passed away, your home or farm will belong to Children's Medical Center Foundation. We will use or sell the property to further our charitable work.  

Benefits of a retained life estate include receiving a federal income tax deduction for the value of the remainder interest in your home or farm, preserving your lifetime use and control of your home or farm, and creating a life estate based on more than one life. This will preserve the use of the property for you and a loved one, such as a spouse or dependent child. 

Use-case example of donating real estate to charity with a retained life estate: At the age of 80, Taylor puts their $400,000 home into a retained life estate and reserves the right to live in it for the rest of their life. They will receive an income tax deduction based upon the current IRS discount rate. The charitable deduction calculation of a residence or farm includes both the value of the underlying land, which is not depreciable, and the value of the buildings and structures attached to the land, which are. Taylor gets to keep living in the home as long as desired, and gets to benefit today, and for up to five years, from the charitable tax deduction. 

What are the benefits of donating land to charity?  

While all gifts differ, there are several general benefits of gifting land or real property to Children’s Medical Center Foundation, ranging from financial to personal:  

• Avoid capital gains tax on your property’s growth in value  
• Deduct the property’s value from your taxable income   
• Receive an income tax deduction for up to 5 years  
• Simplify your estate plan 
• Build a legacy from your highly appreciated asset 
• Relieve yourself from the burden of property management 
• Avoid the need for a 1031 exchange  
• Receive lifetime income for you and another beneficiary  
• Make life better for children  

Avoid capital gains tax  

Donating land to Children’s Medical Center Foundation can help avoid capital gains tax on your property’s appreciated value. If you were to sell your land instead of donating it, the increase in property value since you bought it—also known as its cost basis—would likely be subject to capital gains tax. Donating land to charity is a way to ensure that a larger portion of the proceeds from your valuable asset go to supporting the mission of Children’s Health. 

Deduct property’s value from taxable income  

Donating land to charity helps to deduct your property’s value from your taxable income. You can deduct your property’s fair market value from your taxable income – generally up to 30% of your adjusted gross income. This can mean large savings, especially if your donated land is worth a significant amount.

Simplify your estate plan  

Donating land to charity helps to simplify your estate plan. When you donate land, you remove it from your estate, helping to reduce your estate tax burden on your beneficiaries.

Build a charitable legacy  

Donating property to charity helps you begin a long-term charitable legacy. Real estate is usually valuable and highly appreciated, so donating it can be a tax-efficient way to begin a multi-year charitable journey with Children’s Medical Center Foundation. The proceeds will be used to support the future of health care at Children’s Health.

What to consider before donating land to charity   

We look forward to helping you learn more about how to donate your property to Children’s Medical Center Foundation. Some questions that we will ask to learn about the viability of your property for donation are listed below to help you prepare for a conversation and to receive a complimentary illustration of benefits:

• What is the estimated value of the property? 
• Has the property been owned for longer than one year? 
• What is the estimated cost basis?  
• Where is the location of property?  
• What is the type of property? (eg. Single family residence, condo, apartment building, commercial property) 
• Is the property tenant-occupied? 
• If tenant-occupied, what is the approximate annual net rental income? 
• Is there any debt on the property? 
• How is the property owned? 
• Have you consulted with your financial advisor or tax attorney? 

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