Give the give of property while continuing to live and work on your property.
If you are a landowner looking to donate your land, but not transfer it right away, then giving a gift of a remainder interest might be the perfect option for you. With this donation you can still live on your property, use it, and then upon your death, the title will automatically transfer to the Alaska Farmland Trust. The property, in this instance will be exempt from any claims of creditors against the estate.
If you are thinking of donating your land to the Alaska Farmland Trust, please know that it is important to involve us early in the process. For us to access the gift, the property needs to be approved by the Board of Directors, search of the legal title and a hazardous waste review must be conducted prior to us accepting the gift.
Also, we really would like to completely understand your expectations on a number of issues relating to your gift including:
- Do you intent to reserve a life interest for yourself and/or family members or friends.
- What conservation restrictions would you want to be placed on the property.
- What your long range vision is for ownership of the property.
In order for the Alaska Farmland Trust to move forward and to help you decide if this is the right fit for you we would need to know the following as well:
- The fair market value of the property
- The names/birth dates of the those who will hold life interest in the property.
With the above information we can help calculate your income tax deduction and draft the deed of transfer.
Please consult with your attorney and financial adviser before going down this path to make sure you are making the best decision for you and your family.
As your setting up your gift of the remainder interest in the property, it is important that you talk with the Alaska Farmland Trust about what your long term wishes are for the property. There are three potential outcomes for the property:
- If the land has a conservation value, we as the new landowner will place a conservation easement on the property to protect those values, assuming a conservation easement isn’t already in place. After which, we will sell the property through the Alaska FarmLink Program. The proceeds from the sale will go towards building our financial reserves or protecting other critical parcels of farmland.
- If the property doesn’t have any conservation value or is no appropriate for public use, then we will sell the property outright and use the proceeds to support our mission.
- In instances where public ownership is more appropriate, we will convey the property to a public entity.
To think about how this is calculated, consider what you as the donor are ACTUALLY giving.
In the instance of a remainder trust, where you will retaining a life interest in the property, the deduction would be limited to the present value of the remainder interest that is given to the Alaska Farmland Trust. This amount is determined using actuarial tables put forth by the IRS.
What goes into determining the value:
- The number of people that are holding the life interest, their ages, and the federal discount rate set by the IRS.
- This discount rate changes monthly. Alaska Farmland Trust staff can help by preparing an analysis when you call.
Limits on your tax deduction:
When you are donating gifts that involve appreciated real property, the level of tax deduction is limited to 30 percent of the donor’s adjusted gross income. That beings said, any unused portion can be carried forward on your taxes over a 5 year period.
Terminating your life interest:
If you choose to terminate your life interest in a property you may receive additional income tax deductions as the title transfer is being accelerated to the charity.
Special Circumstances to consider:
If your gift of a remainder trust has a mortgage there are special income tax rules that your tax advisor should look over.
Yes, in many circumstances it is.
The donor claims an income tax deduction for the gift of a remainder interest if the property:
- is a residence of the donor, this includes a second home;
- is a farm;
- OR, has any significant public recreation, conservation, or historical value as designated by IRS rules.
Alaska Farmland trust can make a preliminary assessment to what your deductibility. That beings said, the donor SHOULD ALWAYS seek legal and accounting advice when making a charitable give that involves real property.
The Remainder Interest Process:
Donor creates and executes a standard deed which conveys property to the Alaska Farmland Trust. At that time, the deed reserves a “life estate” for one or more people referred to as the “life tenants.”
How this impacts you as a landowner:
According to the deed, the life tenants are allowed to live on the property. But the life tenants are required to:
- Pay the property taxes,
- Keep the property insured,
- Maintain the land and buildings in good condition,
- Maintain the conservation value of the property if described within the deed.
The life tenant can also continue to generate income off of the property. The Alaska Farmland Trust has no right to use the property as long as any of the life tenants are alive.
If the life tenants no longer wish to use the property, the may get rid of their life estates, which will allow the property to pass to charity and provide the life tenants with additional tax deductions.
This website is intended to be an educational guide only and should not be seen as legal, accounting or any other professional advice. Please consult with the professionals in the instance that you would like to make a bequest to the Alaska Farmland Trust.