Sell a House, Build a Legacy

OVER THE YEARS, people have asked me if the Indiana University School of Medicine will accept a gift of real estate. The answer is a resounding yes. Donating real estate can be a great way to cement your legacy at IU. But many folks are not aware of the different ways to make such a gift, nor the tax benefits that are available. Here are some real examples of recent gifts.

OUT-OF-STATE RESIDENCE
Location: Naples, Florida
Value: $2.5 million
Legacy Gift: Endowed chair in cardiology
Giving method: Retained Life Estate

This married couple raised their children in this home. The kids are grown, living in their own homes and have no interest in keeping the house in the family. This couple gave their home to the School of Medicine but retained a life estate. That means the couple can live in their home for as long as they wish. They remain responsible for paying taxes, insurance and maintenance.

By using this giving technique, these people generated a hefty charitable income tax deduction they can use immediately. Plus they will minimize exposure to the federal estate tax upon their deaths, when the School of Medicine will take possession of the property.

IN-STATE RESIDENCE
Location: Indiana
Value: $420,000
Legacy Gift Created: Endowed fund in pancreatic cancer research
Giving method: Transfer on Death Deed

Indiana has a law that allowed this widower to utilize a transfer on death deed, a rather expedient way to make a gift of real estate. He simply recorded a deed at the local court house, naming the School of Medicine as the sole beneficiary of his home. Upon his death, ownership automatically transfers to the school, but during his life he still fully owns the home and is responsible for all maintenance, taxes and insurance.

Although an immediate charitable deduction is not available, his estate avoids having to pay unnecessary probate, legal and administrative costs typically connected to the transfer of real estate. Additionally, upon his death this gift will generate an estate tax charitable deduction. It should be noted, though, that transfers may not be available for real estate located outside of Indiana.

MEDICAL OFFICE
Location: Nashville, Tennessee
Value: $600,000
Legacy Gift Created: Endowment for a needs-based scholarship
Giving method: Bargain Sale

When this doctor neared retirement, he no longer wanted the hassle of maintaining his medical building and collecting rent. He arranged with the School of Medicine to enter into a bargain sale—which is part gift and part sale. IU paid the doctor $240,000, or 40 percent of the building’s value, which the donor intends to use to travel the world. The remaining 60 percent of its value was treated as a gift that will endow the new scholarship. It has the added advantage of generating a sizable $360,000 charitable income tax deduction he can use immediately.

VACATION RESIDENCE
Location: Fort Myers, Florida
Value: $900,000
Legacy Gift Created: Endowed fund in macular degeneration research
Giving Method: Simple Bequest

This couple has a vacation home that holds many memories of wonderful vacations with children and grandchildren. But the donors also know when they pass away, their children—now living across the country and with busy schedules—will not be able to maintain the property.

So these donors used a simple bequest in their estate plan, instructing their executor to give the house to the School of Medicine upon their deaths. After the School of Medicine sells the house, it will use the cash proceeds to fund this new endowment. And the couple’s estate will also generate a sizable estate tax charitable deduction.

If you would like to explore the various methods to make a gift of real estate, please contact Tim W. Ueber at twueber@iu.edu or 317.274.0187.