Making a Gift that Gives Back
Bernie and Joyce purchased a weekend cabin on waterfront property more than forty years ago. Now that they and their family don't use the cabin anymore, maintaining it and renting it out had become too much work. The property had increased greatly in value, so selling it would mean a hefty capital gains tax for them. Bernie and Joyce talked to their tax advisory about a way to save taxes.
Bernie: We were fortunate to invest in real estate and see it increase in value greatly over the years, but selling it would mean we would pay a large tax.
Joyce: We were hoping to get some of the cash out of the property, but how could we do it without paying a lot of tax?
Bernie: We checked with our CPA. He suggested that we talk to a gift planner at Seattle University. We were happy to discover that we could transfer 50% of the property into a special trust called a unitrust. When we transfer the property into that trust, it can then be sold tax free.
Joyce: Best of all, we are able to sell the other 50% of the real estate for cash. The deduction on the charitable trust saves enough in tax so that we only pay minimal tax on the sale of our half of the property. We will have a nice sum available from the sale of the real estate to use for travel, family needs or for those "rainy day" things that come up.
Bernie: This was a wonderful agreement. I am pleased that we were able to set up the trust. We now will have income from our unitrust and the security of some extra cash, as well.
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