Donating a Charitable Remainder Interest:
How to Have your Cake, while Making a Difference in the World (and other Mixed Metaphors)
Most people who own real estate have a "fee simple" interest in the property. A fee simple interest can be divided into a "life interest" (the interest in the property during the owner's lifetime), and a "remainder interest" (the portion of the owner's interest that he or she can leave to others, for example, through a will). If you own a fee simple interest in real estate, you have an opportunity to make a difference in the world, while receiving significant tax and other economic benefits, by donating your remainder interest to a non-profit, tax-exempt organization of your choosing. While this type of donation can be used to support any kind of tax-exempt, non-profit organization, the focus of this article is on supporting organizations that conserve land and water for uses other than traditional development.
If your property has important conservation values (in the opinion of the charitable organization), then the recipient organization might retain and protect all or a portion of the Property for a long time, or even forever. If your Property does not have important conservation values, then the Property could be sold by the organization to raise funds in order to further its charitable mission (e.g., by purchasing other, more environmentally valuable, property).
This type of donation not only accomplishes your charitable objectives, but can also allow you to enjoy one or more potential economic benefits:
- Charitable income tax deduction in the year the gift is made
- Avoidance of capital gains taxes
- Reduction of future gift and estate taxes
- Retention of a life estate
- Receipt of fixed or variable annuity payments (to you or someone else) during your lifetime
Donating a charitable remainder interest might work well for you if leaving the property to a particular person (usually a family member) is not a high priority for you. If you do wish to leave the property to someone, then you might consider creating a "charitable lead trust", rather than donating a charitable remainder interest. A charitable lead trust is slightly more complex than donating a charitable remainder interest, and is outside the scope of this article. However, you can find out more about charitable lead trusts by using the reference information included in this article, below.
For additional general information about donating a charitable remainder interest, creating a charitable lead trust, and other charitable and estate planning options, I suggest that you contact the local office of either The Nature Conservancy or Trust for Public Land. See contact information, below:
The Nature Conservancy of Washington
217 Pine Street, Suite 1100
Seattle, WA 98101
Phone: (206) 343-4344
Fax: (206) 343-5608
Trust for Public Land
Northwest Regional Office
Waterfront Place Building, Suite 605
1011 Western Avenue
Seattle, WA 98104
Phone: (206) 587-2447
Fax: (206) 382-3414
See especially the following portions of the websites for each of these organization:
• The Nature Conservancy: Charitable Remainder Unitrusts
• Trust for Public Land: Outright Gifts of Assets and Retained Life Estates
Please remember that this article contains only the most basic information about its subject matter. I do not intend this article to contain legal advice specific to any particular person or situation. Before entering into any agreement concerning your property, I urge you to consult with a real estate lawyer and with your tax or estate planning advisor.
Under current IRS rules, the donor may not claim a charitable deduction if the donor remains in possession of (i.e., live on) the property after the gift is made.