Donation of Land
A donation of land to the Sussex County Land Trust is the simplest way to protect your land in perpetuity. By transferring the title, not only are your providing long-term protection to the land, you are receive tax benefits in the form of income tax deductions, potential estate tax benefits and relief from property taxes.
In an outright donation, full title and ownership to the land is given now. This offers the maximum tax advantages because you make take a charitable gift deduction based on the full fair market value of your property. A qualified appraiser would determine the value of the gift of land. You would no loner pay property taxes on the donated land and estate taxes for this land would be eliminated.
- Donation by Devise
A gift of land through your will is a donation by devise. You retain full use and control over land while you are alive and ensure its protection after you are gone. You do not receive an income tax deduction for this technique. However, your estate taxes are reduced and your heirs may benefit from reduced inheritance taxes.
- Donation with Reserved Life Estate
The reserved life estate option provides for your donation of the land now to Sussex County Land Trust. You would retain use of all or part of the donated land during your lifetime or the lifetime of the designated immediate family members. The value of your donation for tax purposes is based on the fair market value of the property less the estimated value of life interest in the property according to the Internal Revenue Service tables based on your age and life expectancy. The tax advantages are less that with an outright donation but greater than with a donation by devise.
- Donation with Reserved Income
You may want to donate your land but need income generated from agricultural or hunting leases during your lifetime. The land may be deeded to Sussex County Land Trust with all or part of the lease fees reserved to you for life. The property is removed from your estate, thereby avoiding inheritance and real estate taxes, and you may have a charitable deduction from income taxes.
- Donation to Charitable Remainder Trust
A donation to a Charitable Remainder Trust involves the sale of your property by a trustee, usually a bank. You would transfer real property to an irrevocable trust and retain either a fixed or a variable income from the property to be paid to you annually for your lifetime or for a fixed number of years. You may also provide for the income to be paid to family members during their lifetime or for a fixed number of years. The trust assets are realized when the trustee sells the real estate.
The benefit of this form of donation is that you avoid capital gains, real estate, and inheritance taxes. You no longer have the liability of management or taxes and may also be eligible for an income tax deduction for the donation to the trust. The amount of your income is on the value of the entire sale proceeds rather than the amount it would have been after the payment of the capital gains tax, You also designate the beneficiary of the trust upon its termination.
- Sale of Land
You may elect to sell your property to Sussex County Land Trust at fair market value, at a bargain sale or in installments. An additional benefit of a sale to the Sussex County Land Trust is the elimination of your liability of realty transfer tax and recordation fees.
- Sale at Fair Market Value
For this option you would receive the full fair market price of your land as determined by a qualified appraisal following required guidelines for government agencies. The Sussex County Land Trust has adopted a site criteria checklist for all purchases and each property must meet this establishes criteria prior to any acquisition. If your land is sold to SCLT for its full value and it has appreciated since you originally purchased it, you are liable for income tax on the capital gain.
- Bargain Sale
In the bargain sale you would sell your land to the Sussex County Land Trust at less than the fair market value. The difference between the selling price and the fair market appraised value is considered a donation. You may then be eligible for a charitable income tax donation equal to the difference between the full price an the bargain price.
For example, say you own land with a fair market value of $1,000,000 which you bargain sell to SCLT for $600,000. You would receive $600,000 and a charitable $400,000 for the land value amount you donated. Also, be selling at less than fair market value there be a smaller capital gain to be taxed. Depending on your financial situation a bargain sale may be advantageous. As always, you should consult a tax advisor for your best option.
- Installment Sale
For an installment sale you would sell a portion of your land with an option to sell the remainder in successive years thereafter. You would be spreading the income from the sale over several years, thereby helping to reduce your capital gains tax.
- Sale with Reserved Life Estate
You may sell your property to the Sussex County Land Trust and retain the right of lifetime tenancy for you or your immediate family. The capital gains tax would depend on whether the sale is at fair market value, at bargain sale, or in installments.
- Endowments
An endowment is a gift of money accompanying the donation or sale of real estate to cover the expenses of adequately maintaining a specific property. Endowments serve as a valuable instrument for maintaining several properties owned by the Sussex County Land Trust. The funds are typically deposited with the Trust or a trustee and are earmarked by the donor for specific purposes. Donations without a specified use are also received and may be used for any purpose associated with the property. Donations to endowments are considered charitable contributions and are eligible for tax deductions.