Planning Your Gift
Gifts of Real Estate
Committee on Development
September 28, 2007
One year ago, we discussed the opportunity for individuals to contribute to Hamilton IRA assets during one's lifetime, an advantageous gift option that exists for donors at least 70½ years of age through December 31, 2007. The details of the legislation may be found on the October 13, 2006, Planned Giving Minute, attached.
Hamilton alumni frequently contribute appreciated securities and real property. Lawry Gulick '52, founder of The Buffers, distinguished professor at Delaware and Dartmouth, Dean of Hamilton and President of St. Lawrence, and his wife Win, who was very helpful to me when she worked in Communications & Development, completed a textbook contribution of real property in trust. Some highlights:
Lawry served as trustee — Hamilton's name never appeared in the chain of title — allowing him to manage the sale of the vacation home.
Win and Lawry selected a "Flip" unitrust with a 5% payout rate, the correct gift vehicle with the lowest unitrust rate permissible under federal law.
The 5% unitrust rate allows maximum trust appreciation to meet the philanthropic objectives of the Gulick Fund for student research and payments likely to keep pace with inflation over time.
After the real property was sold, Dr. Gulick resigned as trustee, appointed Hamilton successor trustee and the College invested the net proceeds with Kaspick & Company per policy.
The Gulicks received an income tax deduction, saved capital gains tax, obtained professional investment management of their unitrust, provided themselves with a stream of variable payments for as long as either one of them lives — from an asset that produced no income — and possibly saved estate tax.
Real property receives the same treatment as appreciated securities — deduction at fair market value and avoidance of tax on long-term capital gain. Also, donors may break up real property into smaller parts, literally and figuratively. Beyond "Flip" unitrusts, donors may contribute:
the entire property — an outright contribution,
an undivided partial interest in real property,
a remainder interest in a personal residence, while retaining life use.
Hamilton has entered into Bargain Sale and Installment Bargain Sale agreements with donors.
When discussing real property with potential donors, please keep in mind that the best options and tax benefits are associated with debt-free real property held long term.