CCIM Feature

Real Estate: A Valuable Charitable Gift

Billions of dollars are given to charities but only about 2 percent of that amount is in real estate. Although the average value of a real estate donation is in excess of $600,000, approximately 80 percent of real estate gifts are rejected because charities don’t have the expertise to evaluate the real estate’s value, handle the transaction, and either dispose of it or manage it. The charities that accept real estate generally resell it and obtain cash, rather than holding and managing the property.

Even with a downturn in real estate values, the largest percentage of wealth in this country is still in real estate. Donating real estate to a charity can benefit the donor by lowering transfer expenses, reducing capital gains taxes, and providing charitable deductions at the federal and sometimes the state level, depending on state law.

There are a number of ways to donate real property to a charity.

Outright donation. An individual or corporation deeds real property to a charity outright or in trust.

Bequest. A charity is identified in a will as a beneficiary upon the death of a donor.

Charitable gift annuity. A donor transfers real estate in exchange for a guaranteed life income under a contract. Generally, the charity receives the property, sells it, and contributes the proceeds to a trust company so that payments can be made to a donor. This type of annuity is not available in all states.

Charitable remainder trust. An irrevocable trust is set up with two sets of beneficiaries -- income and charitable. The income beneficiary is usually the donor who receives a percentage of income from the trust for life or a term of years. The charitable beneficiary receives the principal of the trust after the income beneficiary dies.

Bargain sale. Real property is sold to a charity at less than fair market value. The donor bypasses gain on the gift portion and receives a charitable deduction but must recognize gain on the value received.

Retained life estate. A donor makes a donation of a primary or secondary home but continues to live in it or obtains rental income from it, and obtains a charitable deduction based on Internal Revenue Service tables. The property passes to the charity upon the donor’s death.

The Process

Almost every type of real estate can be donated to a charity. The process and due diligence may be different, but all types of real estate can be evaluated for donation purposes.

Real Estate Gifting Realized,” a CCIM Foundation Program, can assist CCIMs and other commercial real estate professionals, donors, and charities. In essence, the Foundation works with donors to accept real estate for itself or serves as a facilitator in the transaction for other charities.

The first step is an explanation of the real estate donation process. Then, when a donor is ready to move forward, a team of professionals will assess the property to determine the viability of accepting it as a donation. If the donation makes sense for both the donor and the charity, specific duties will be assigned to the appropriate team members up to and including closing. Team members may include brokers, leasing professionals, investment counselors, asset managers, appraisers, environmental engineers, structural engineers, property managers, corporate real estate executives, developers, institutional investors, lenders, and attorneys.

As a CCIM, you may have clients such as investors and corporations that have an interest in donating real estate for philanthropic or other reasons, such as disposing of an underutilized property. This is a program that may help you assist those clients in achieving their objectives and also differentiate yourself as the “real estate gifting” resource in the community as you gain valuable public relations exposure for your work.

Real Estate Gifting Realized” is a program that may offer business opportunities for you to assist donors or other charitable organizations, and it may also benefit you personally as you engage in estate planning and divest yourself of real estate assets. The Foundation can serve as your resource and facilitator in the process.

If you are interested in more information, please visit www.realestategifting.org where you will find an archive of articles on the subject and video presentations. You may also contact Doug Strickland, the director of Real Estate Gifting at 312-321-4491 or at doug@ccimef.org.

Mary Stark-Hood, JD, CFP is president of the Hood Group, which provides consulting services to business organizations and foundations. She currently serves as a consultant to the CCIM Foundation. Contact her at maryshood@comcast.net.

Mary Stark-Hood, JD, CFP

Mary Stark-Hood, JD, CFP, is president of the Hood Group, Inc., and serves as a consultant to the CCIM Foundation. Contact her at maryshood@comcast.net

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