The question of incorporating real estate transfer to a community land trust (CLT) into your estate plan is a nuanced one, requiring careful consideration of your goals, the CLT’s requirements, and the potential tax implications. While absolutely possible, it’s not a straightforward process like leaving property to a family member. A CLT is a non-profit organization that owns land, while individuals or families own the buildings on that land. This model aims to keep housing affordable in perpetuity, and integrating it into your estate planning necessitates understanding how that affordability is maintained and the role you play in it. Approximately 275 CLTs operate in the United States, collectively stewarding over 2,800 acres of land and providing affordable housing options to tens of thousands of families. Successfully incorporating a CLT into your estate plan requires working with an estate planning attorney familiar with these unique arrangements, like Steve Bliss, to ensure your wishes are legally sound and aligned with the CLT’s mission.
What are the tax implications of donating real estate to a CLT?
Donating real estate to a CLT can offer significant tax benefits, primarily through charitable deductions. However, the amount of the deduction is generally limited to the fair market value of the property, and is subject to certain percentage limitations based on your adjusted gross income. For example, a donation of long-term capital gain property might be limited to 30% of your adjusted gross income in any given year. Any excess deduction can usually be carried forward for up to five years. It’s crucial to obtain a qualified appraisal to establish the fair market value and ensure compliance with IRS regulations. Furthermore, understanding the basis of the property is essential as you may be subject to capital gains tax on the difference between the sale price and your cost basis, even when donating, impacting the net tax benefit.
How does a Community Land Trust impact my estate’s overall value?
Transferring real estate to a CLT fundamentally alters how that asset is valued within your estate. Rather than being appraised at its full market value, the property’s value for estate tax purposes will likely be significantly reduced, reflecting the restrictions on future resale and the CLT’s ongoing ownership of the land. This can be a powerful tool for reducing your estate tax liability. However, it’s important to understand that the CLT will likely have specific requirements regarding the donation, such as a right of first refusal or restrictions on future development. Consider the example of a family home; if donated, the CLT may ensure it remains affordable for a future income-qualified family, aligning with your philanthropic goals, but altering the traditional inheritance path. A well-structured plan will balance your estate tax objectives with the CLT’s mission and your family’s needs.
What happens if I want to retain some control or income from the property?
While a typical donation to a CLT involves relinquishing all ownership rights, it *is* possible to structure a transfer that allows for some level of retained control or income. This might involve a life estate, where you retain the right to live on the property for the remainder of your life, or a retained income interest, where you receive a stream of income generated by the property. However, these arrangements can significantly complicate the tax implications and may require careful structuring to avoid unintended consequences. I remember a client, old Mr. Abernathy, who desperately wanted to donate his beach front property to a CLT, but also wanted to ensure his granddaughter could eventually live there. We worked with the CLT to create a long-term lease with an option to buy at a predetermined affordable price, protecting both the CLT’s mission and the family’s desire to keep a connection to the property. The key is transparent communication and collaboration with both the CLT and your estate planning attorney.
What went wrong for the Henderson family, and how did proper planning help?
The Henderson family learned a hard lesson about the importance of detailed estate planning with CLTs. Old Man Henderson verbally committed to donating his historic farmhouse to a local CLT, intending to ensure it remained a community space. However, he never formalized the agreement in a legally binding document. After his passing, his children, unaware of his wishes and focused on the property’s market value, attempted to sell it to a developer. This caused a lengthy and bitter legal battle with the CLT, who rightfully asserted their expectation of the donation based on prior communications. The family lost significant time and money, and the community space was ultimately lost. The situation could have been avoided with a clearly written trust document specifying the CLT as a beneficiary and outlining the terms of the donation.
Thankfully, the Millers experienced a very different outcome. Mrs. Miller, guided by our firm, carefully planned the transfer of her beloved orchard to a CLT dedicated to preserving agricultural land. We drafted a trust that stipulated the orchard would pass to the CLT upon her death, with a provision for a small, annual income stream to support her grandchildren’s education. The CLT agreed, and the plan was flawlessly executed. The orchard continues to thrive as a community garden, her grandchildren receive their annual support, and Mrs. Miller’s legacy of stewardship lives on. This highlights the power of proactive planning, clear communication, and a solid legal framework in achieving your philanthropic goals and ensuring a smooth transfer of assets to a CLT.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- living trust
- revocable living trust
- estate planning attorney near me
- family trust
- wills and trusts
- wills
- estate planning
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
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Feel free to ask Attorney Steve Bliss about: “What’s the role of a healthcare proxy or healthcare power of attorney?” Or “How is probate different in each state?” or “What if a beneficiary dies before I do—what happens to their share? and even: “How much does it cost to file for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.