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
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
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 firstname.lastname@example.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 email@example.com.