Rooted in Values: How Gifting Land Can Create Lasting Impact 

With over 2 million farms in the United States, you likely have clients who own farm property. This is an asset that carries emotional significance and complexity and it’s crucial to understand the tax implications and estate planning strategies surrounding farmland. For these reasons, it’s important to explore the benefits of donating real estate, such as a ranch or farmland, to Greater Houston Community Foundation and how it can help your clients achieve their philanthropic goals while minimizing tax liabilities. Greater Houston Community Foundation and how it can help your clients achieve their philanthropic goals while minimizing tax liabilities. 

Land is often more than just an asset—it’s a family legacy, a source of pride, and a symbol of hard work. As such, it can be challenging for clients to part with it, even in the context of estate planning. However, with the right approach, gifting farmland can be a tax-efficient way to reduce the value of their taxable estate and achieve their philanthropic goals. 

How do you give someone a piece of land?

Transferring land ownership involves several important steps, whether you’re gifting to a family member or a charitable organization. After you’ve sufficiently planned the transfer, the process typically includes at least the following steps:

1. Title transfer: Working with a real estate attorney to prepare and execute a deed
2. Property appraisal: Obtaining a qualified appraisal to determine fair market value
3. Recording the deed: Filing the transfer with the appropriate county clerk’s office
4. Tax documentation: Completing necessary gift tax forms if the value exceeds annual exclusion limits

When you donate real estate to Greater Houston Community Foundation, our team can guide you through each step of the process, working alongside your attorneys and tax advisors to help ensure a smooth transfer. The Community Foundation has extensive experience accepting various types of property donations, from farmland and ranches to commercial real estate and vacation homes.

Gifting land: multiple options for your clients 

Greater Houston Community Foundation offers a range of options for gifting land, each with its own benefits. Here are some ways to structure a gift: 

• Outright gift: Donate the land directly to the Community Foundation, which can provide tax-deductible benefits and may avoid capital gains tax. 
• Bargain sale: A bargain sale to charity is a hybrid transaction where you sell an appreciated asset (like real estate or stock) to a charity for less than its fair market value (FMV), combining a partial sale with a charitable gift. This allows you to get cash, a significant income tax deduction for the “bargain” portion (FMV minus sale price), and avoid capital gains tax on the donated part, while the charity gets the asset for a lower cost. You receive cash for the sale part and a deduction for the gift part, but must prorate the asset’s basis and pay capital gains tax on the sale portion. 
• Charitable remainder trust: Transfer the land to a trust that generates lifetime income for your client while also providing a tax deduction. 
• Conservation easements: Using conservation easements can be an effective way to fulfill charitable intentions with real estate but must be carefully constructed to avoid IRS scrutiny. 
• Be aware of potential pitfalls and consult with experts in this area to ensure your client’s intentions align with their philanthropic goals.

For clients considering donating property to charity, each of these structures may offer unique advantages depending on their financial situation and long-term philanthropic objectives.

The tax implications of land gifts

Do you get taxed on gifted land?

The tax treatment of gifted land depends on whether you’re the donor or the recipient of the land, and whether the gift is made during your lifetime or as part of your estate.

• For donors: When you gift land during your lifetime, you generally don’t pay income tax on the transfer itself. However, you may be subject to federal gift tax if the value exceeds the annual exclusion amount. Fortunately, most donors never actually pay gift tax due to the lifetime gift and estate tax exemption, which is substantial.
• For charitable gifts: When you donate land to a qualified charitable organization like Greater Houston Community Foundation, you’re not subject to gift tax. Instead, you may be eligible for an income tax deduction based on the property’s fair market value.

How to avoid gift tax on property

There are strategies available to help your clients minimize or eliminate gift tax concerns when transferring property:

• Utilize the annual exclusion: Gift fractional interests in property over multiple years to stay within annual exclusion limits
• Leverage the lifetime exemption: The current unified credit allows substantial transfers without triggering gift tax
• Donate to charity: Gifts to qualified charitable organizations are not subject to gift tax and may provide income tax deductions
• Consider installment sales: Structure transfers to family members as sales rather than gifts
• Use qualified personal residence trusts: Transfer your home while retaining the right to live there

These strategies can be particularly for clients who are concerned with preserving wealth for future generations.

Read about the Great Wealth Transfer

Rules on gifting money to family

While this article focuses on land gifts, it’s worth noting that many of the same principles apply to monetary gifts to family members. The IRS allows individuals to gift up to the annual exclusion amount per recipient without filing a gift tax return. Amounts exceeding this threshold require Gift Tax Return filings, though they may not result in actual tax liability due to the lifetime exemption.

For clients considering family wealth transfer strategies, combining gifts of appreciated assets with charitable giving can be particularly tax-efficient. Whether that be bunching donations or donating appreciated stock, the Community Foundation can help your clients implement strategies that maximize charitable deductions while achieving both family and philanthropic goals.

What are the disadvantages of gifting property?

While gifting property can be an excellent estate planning and philanthropic strategy, advisors should help clients understand potential drawbacks, which may include:

• Irrevocability
• Capital gains considerations
• Marketability challenges
• Maintenance and carrying costs
• Appraisal requirements

Despite these considerations, gifting property—whether to family or charity—is a powerful tool when structured properly. The key is working with experienced advisors who understand both the philanthropic and tax planning aspects. Just as with donating art to charity, real estate gifts require careful planning and documentation.

Keeping the Family Ties 

Gifting farmland or a ranch to the Foundation doesn’t mean severing ties with the family’s legacy. In fact, it can be an opportunity to extend the family’s values and traditions beyond the land itself. By working with the Foundation, your client can ensure that family members continue to play a role in advising the fund and recommending grants to charities that align with the family’s values.  

Case Study: The Paterson Family Legacy 

For generations, the Paterson family had operated a thriving farm in rural Southeast Texas. The farm was not just a source of income, but a symbol of family tradition and values. The Paterson’s were proud of their heritage and worked hard to maintain the land, pass down knowledge and skills to the next generation, and give back to their community. 

As the years went by, the farm became less viable, and the Paterson’s began to explore options for preserving their legacy. They met with an advisor who introduced them to the concept of gifting farmland to charity. The idea resonated with the family, as they wanted to ensure that their values and traditions continued to be honored. 

The Paterson’s decided to establish the Paterson Seedling Foundation upon gifting the farm to Greater Houston Community Foundation. A donor advised fund, was established, which would allow them to support charitable initiatives that aligned with their family’s values. They also wanted to involve multiple generations of family members in the decision-making process. 

To achieve this, the Paterson’s designated advisors to the fund from three generations of the family. These advisors can collectively recommend grants to charities that carry on the values held by the family. The advisors included:  

• John, the patriarch of the family, spent his entire life working on the farm. 

• Emily, John’s daughter, helped manage the farm operations and was passionate about sustainable agriculture. 

• Ben, Emily’s son is young and interested in farming but not full-time.

• Mary, John’s granddaughter, was studying agricultural business in college. 

The family worked together to recommend grants from the fund to charities that aligned with their values. Through their collective efforts, the Paterson family made a significant impact on their community. They supported programs that promoted sustainable agriculture, provided scholarships to young farmers, and helped entrepreneurs build successful farming operations. 

 “This is more than just a gift,” said Emily. “It’s a way for our family to leave a lasting impact on our community. We’re carrying on our values and traditions and involving all generations of our family in the process.” 

The case study presented in this blog is a fictionalized account of real-world scenarios, created for educational purposes only.

Interested in gifting land? Sow the seeds of your legacy with the Community Foundation.

Gifting land to Greater Houston Community Foundation can be a powerful way for your clients to achieve their philanthropic goals while minimizing tax liabilities. By exploring multiple options for structuring a gift, your clients can ensure that their values and legacy are preserved for generations to come. As an advisor, you have a unique opportunity to help your clients unlock the full potential of their philanthropic endeavors—seize it! 

To learn more about all the different ways your clients can support causes they care about, explore our comprehensive guide to charitable gift types.

Contact Kevin Pickett to learn more about how your client can make a lasting impact in the community by gifting a piece of their family’s farmland. 

More Helpful Articles by Greater Houston Community Foundation: 

• Charitable Deduction Carry Forward: Making the Most of Your Donation
• Your Guide to Making Noncash Charitable Contributions
• Should I Be Bunching Charitable Donations?
• Incorporating Charitable Giving into Your Investment Strategy
• How To Make a Bequest to a Donor Advised Fund

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