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Author: JoeSchmoe Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76384  
Subject: Protected trust Date: 6/13/1998 12:27 AM
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This may be the wrong forum for this question, but:

I am interested in purchasing some land in Montana, Wyoming, North Dakota, South Dakota, or Idaho; maybe 5-10 acres, not as an investment, but as a possible retirement area.

However, I would like to be able to be 100% certain that this land will always be there. I have heard that it's possible to donate the land to a charity with the stipulation that I retain usage of the land until I die, at which point the charity owns the land. If I do this, is the donation tax deductible? If so, is it deductible now or when I die?

Second, and more importantly, is it true that in this situation, there is absolutely nothing that can take this land away? Hypothetically if I went bankrupt, owned money to everyone and his mother, etc... I would still have access to this land, correct?

Thanks for any help; I would like to make sure that I always have somewhere I can go to live..

Sam
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3775 of 76384
Subject: Re: Protected trust Date: 6/13/1998 8:20 AM
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Sam,

<<I am interested in purchasing some land in Montana, Wyoming, North Dakota, South Dakota, or Idaho; maybe 5-10 acres, not as an investment, but as a possible retirement area.

However, I would like to be able to be 100% certain that this land will always be there. I have heard that it's possible to donate the land to a charity with the stipulation that I retain usage of the land until I die, at which point the charity owns the land. If I do this, is the donation tax deductible? If so, is it deductible now or when I die?

Second, and more importantly, is it true that in this situation, there is absolutely nothing that can take this land away? Hypothetically if I went bankrupt, owned money to everyone and his mother, etc... I would still have access to this land, correct?>>

You're referring to a charitable remainder trust. That's a vehicle in which you donate property to a charity while retaining the right to use that property during your lifetime. Under the right circumstances, it can provide you with a current tax deduction while preserving your use of the asset. It takes an attorney to set one up properly, but what you describe can be accomplished. If you're interested in doing that, you should consult an estate/trust attorney in your area who is experienced in these matters. Your local chapter of the American Bar Association should be able to provide you a referral.

Regards….Pixy




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Author: Linne Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3780 of 76384
Subject: Re: Protected trust Date: 6/13/1998 9:48 PM
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<< I am interested in purchasing some land in Montana, Wyoming, North Dakota, South Dakota, or Idaho; maybe 5-10 acres, not as an investment, but as a possible retirement area.
However, I would like to be able to be 100% certain that this land will always be there. >>

I don't think you can be 100% certain that the land will always be there, no matter what you do. If the real estate taxes aren't paid, it's gone. It can be taken for right of way for a road. I don't know that a charity would want to take such a donation, either. (taxes owed but no income and no guarantee that there is any value) The most likely thing to have happen is that the land becomes undesirable because of what happens around it (that you have no control over.) A real estate columnist in the Washington Post recommends that you NEVER buy real estate for personal use that you don't plan to use within 6 months - there are just too many things that can go wrong. It's hard to think of land as having NO value, but I know several cases where that's just what happened.

IMHO, your best bet is to keep your high-paying jobs and aggressive savings and investment strategy! ;-)



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Author: KATinChicagoland Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3786 of 76384
Subject: Re: Protected trust Date: 6/14/1998 11:19 AM
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While it's reasonable of Pixy to raise the question of using a charitable remainder trust, I believe this vehicle is unsuitable for the planned use. For one thing, the property must be placed in the hands of a trustee who makes investment decisions based on benefits to both the individual beneficiary and the charitable beneficiary -- which means the trustee could feel compelled to sell the property and reinvest in an asset with greater appreciation potential. And then there's the fact that these trusts are subject to prohibited transaction rules. You'll incur penalties if you make personal use of property held by such a trust.

Kaye Thomas, author
Fairmark Press Tax Guide for Investors
http://www.fairmark.com
Includes a new guide to estimated tax


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Author: LasVegasFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3792 of 76384
Subject: Re: Protected trust Date: 6/14/1998 1:08 PM
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> It's
> hard to think of land as having NO value, but I know >several cases where that's just what
> happened.

I've heard of cases of land having *NEGATIVE* value. This can happen because of liabilities associated with the land. For example, a toxic spill. (I remember hearing of a case where the bank holds a $1 million mortgage but won't forclose--they don't want the liability.) Also, there have been cases of tax problems. (A 60 minutes thing from years ago: A development outside town that flopped. The law required the improvements be paid for--driving property taxes on the occupied land to astronomical levels.)

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