Successful real estate investor makes tax-wise gift
As a real estate investor, George had a knack for success. He traded in real estate and gradually developed his career as a successful real estate investor, eventually holding a sizable portfolio of rental properties. After 40 years of building his business, and in his late seventies, George realized he needed to start planning for retirement. What would his exit strategy be?
At the heart of it, George and his wife, Donna, wanted to make sure each of them would be provided for financially should the other partner pass on. George began considering exit strategy options, especially those alternatives that use current tax law to avoid long-term capital gains. His focus narrowed to the transfer of assets to a charity in exchange for a guaranteed life annuity, the charitable gift annuity (CGA). He made a call to Emanate Health Foundation. His question: How can we enhance and secure our financial future, and, at the same time, leave a legacy to Emanate Health Queen of the Valley Hospital?
Why the hospital? George and Donna wanted a tangible way to express their deep gratitude to the medical and nursing staff at Emanate Health Queen of the Valley Hospital for saving George's life more than 20 years ago. In addition, making a gift to the hospital was George's way of giving back to the community for the success it had given him. Contacting Emanate Health Foundation about meeting their financial goals and supporting the hospital just made sense.
Smart charitable planning
George and Donna soon discovered how a CGA funded with real estate could greatly benefit the hospital and meet their desire for a safe and secure guaranteed payment stream. Utilizing the right planned giving instrument allowed them to accomplish their objective and make a bigger gift than they thought possible using appreciated real estate while being tax-wise and safe.
What are the details?
To establish the CGA, George and Donna made a permanent gift of real estate to Emanate Health Foundation. In return, the foundation agreed to make periodic payments (an "annuity") to George and Donna for the rest of their lives. The annuity payments are guaranteed and stable regardless of changes in the economy.
In addition to the financial peace of mind, the gift provides attractive tax savings. The couple received a charitable income tax deduction for the gift portion of the CGA. The regular annuity payments are partially income tax-free for many years. Using appreciated real estate to fund the CGA, George and Donna receive the annuity payments based on the full market value of the real estate. There will be no long-term capital gain tax reducing the value of George and Donna's annuity.
George spent 40 years building his business and was looking for a way to be charitable in exchange for a safe, tax-advantaged payment stream. George implemented his exit strategy. Let Emanate Health Foundation help you find yours.
Gifts that pay: The charitable gift annuity
To create a charitable gift annuity (CGA), the donor makes a permanent gift of cash, securities or real estate to Emanate Health. In return, Emanate Health agrees to make stable, periodic payments (an annuity) to one or two people (annuitants) for their lifetimes. When the annuitants have passed away and the annuity ends, Emanate Health uses the remaining funds to support its mission.
What are the benefits?
- The donor can turn cash, securities or real estate into a guaranteed stream of payments for one or two people for the rest of their lives.
- The annuity payments are stable regardless of changes in the economy.
- The donor receives a charitable income-tax deduction for the gift portion of the CGA.
- If the donor uses appreciated property to fund the CGA, the donor can avoid the capital gains tax on the exchange that funds the CGA.
- Annuity payments are partially income-tax free, often for many years.
- When one annuitant passes away, the other annuitant will continue to receive the same annuity amount.
- CGA rates depend on the annuitant's age.
- CGA programs are regulated by law and are guaranteed.
- CGAs are flexible and can be planned to meet the donor's needs. Payments can begin immediately or be deferred until retirement, for a higher rate.
To learn more about charitable gifts that pay income, please contact Dan Wood at 626.814.2421.