Effective Ways Of Gift Planning Your Real Estate Assets

Gift planning with real estate can be an effective way to take advantage of the large lifetime-exemption amount without negatively impacting your liquidity. Of course, as with any wealth transfer strategy, there are many considerations to be aware of when transferring real estate, from how to structure the transition to determining who pays for repairs on the property once it’s transferred.

If you have significant real estate assets that you plan to gift or pass on to the next generation, here are some efficient transfer strategies that can help you achieve your goals.

Gift with Lease

One way to remove property from your estate is to make a gift to trust with leaseback. This is a unique strategy that differs from simply gifting real estate to the next generation, but has similar tax benefits. To take advantage of this strategy, the property can be transferred to the next generation through a trust or another entity that is owned by either the trust or the children. The grantor of the trust pays rent on the property, which can be used for ongoing carrying costs of the property.

Donation to Charity

Donating property to a charitable organization can be a tax-efficient way to gift highly appreciated assets while at the same time achieving your family’s philanthropic goals. Since not all charities are set up to accept real estate donations, it’s important to do your research ahead of time to make sure you select the right organization(s). Alternatively, you can donate property to a donor-advised fund, which allows you to support various charitable causes over time.

In cases where the property remains in the family, certain questions must be answered regarding the ongoing usage and maintenance of the property once a transfer strategy is implemented. These questions often include who can use the property, how usage is determined and who will pay for repairs, taxes, and insurance over time. Oftentimes, the trust is set up with an allowance of cash to pay for planned and miscellaneous expenses so that the burden does not fall to one or more children. However, it’s important to have these discussions well in advance so that both grantors and beneficiaries feel comfortable with the agreed-upon arrangements. It can also be helpful to put necessary provisions in place if family dynamics change.

Gifting real estate can be a helpful estate planning technique that has many advantages. Whether you keep the property within your family or donate it to a charitable organization that has special meaning to you, these strategies can help you achieve many of your estate planning goals while maintaining liquidity in the near term.

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