This is a real story about a real Hillcrest couple. They have asked to remain anonymous, so we will call them John and Mary Jones.
Here is their story.
When it came time for the Joneses to sell their home, they had a problem. They had been living at Hillcrest for the past five years and renting their home to family members. It was no longer their personal residence, so they were facing a huge capital gains tax bill.
Normally when any type of property is sold for more than it originally cost, capital gains taxes must be paid on the profit from the sale. But if the property sold is the owners' personal residence, the law is more lenient. The first $250,000 in profit (or gain) per person, or $500,000 per couple, is excluded from being taxed. In other words, if a couple's home grows in value $500,000 or less by the time they sell it, they will owe nothing in capital gains taxes. If it grows in value more than $500,000, they will only owe taxes on the part that exceeds $500,000.
However, in order for a home to be considered a "personal residence" the owners must have lived in it two of the last five years. John and Mary had been living at Hillcrest for the last five years. They did not qualify for the capital gains tax exclusion. They were facing a huge tax bill... unless they could combine the sale with a charitable gift.
Hill's Development Team proposed a plan that would save them taxes, provide them a 9.1% annual return fixed for the rest of their lives, leave something for their children after they are gone, and allow them to make a major gift to Hillcrest.
Here is what they did. They gave 50% of their property to Hillcrest in exchange for a charitable gift annuity that would pay them 9.1% annually for the rest of their lives... that would bypass much of the capital gain taxes... that would give them a charitable tax deduction... that would give them some tax free income... that would save them tens of thousands of dollars in taxes. Plus!! When they are both gone, what is left in the annuity will go to Hillcrest to help seniors who outlive their financial resources.
And what about the other 50% of their property? It will eventually go to their family, but in the meantime will produce income for them for the rest of their lives.
For John and Mary their charitable gift annuity made it possible for them to save more and make more by giving more. What a great plan!
If you would like to hear more about charitable gift annuities and other life-income gifts and how they might help you, contact Reggie Ingram, Hillcrest's Chief Development Officer at (909) 392-4320.