Giving real estate: Part 1

By Todd Cohen

Three years ago, an alumnus approached Princeton about making a $250,000 bequest.

But on learning the donor owned valuable vacation property he no longer used, the school suggested he instead donate it using a charitable trust.

He did, reducing his capital-gains tax, earning a big deduction on his income tax, and securing steady income for himself and his wife until they die, when Princeton will receive the remainder.

“Gifts of real estate can be among the largest gifts a charity might receive,” says Ronald Brown, director of planned giving at Princeton.

Princeton, which has received real estate gifts in the last 10 years worth roughly $30 million, is among a growing number of schools and charities that solicit real estate gifts.

Real estate “equity,” or the value of property minus debt, represents more than half the wealth in the United States, but less than 2 percent of gifts to charity, or roughly $4 billion a year, says Chase Magnuson, president of Real Estate for Charities in Carlsbad, Calif.

“So there’s a huge disconnect between what the donors have in the way of equity they want to give, and what charities will accept as a gift,” says Magnuson, who estimates charities reject 80 percent of all real estate gifts offered by donors.

“Charities are scrambling to get donations and fundraising,” he says, “but can’t make the move over into real estate,”

Charities traditionally have shied from accepting real estate gifts because they can be complex, require a lot of work and possibly involve costs and headaches related to environmental problems, experts say.

“Real estate is a much more complex giving transaction,” says George Bittner, executive director of the Real Estate Charitable Foundation, a supporting foundation of the Greater Kansas City Community Foundation.

“Many nonprofits in their normal course of operations, by policy, do not accept gifts of real estate,” he says, “because of the complexities involved in the entire transaction.”

Ramsay Slugg, Fort Worth, Tex.-based central region director for charitable management services for the private bank at Bank of America in Charlotte, N.C., agrees.

“Many charities are set up to receive stock,” he says. “But most charities are not set up to receive gifts of other types of assets…It’s a challenge for a lot of them.”

Other stories in the series:

Part 2: Some charities move to make a market for real-estate donors.

Part 3: Donors have options in picking a vehicle for real estate gift.

Part 4: Complex tax and financial issues await donors of real estate.

Part 5: Economy, stock market can shape environment for real-estate donations.

Part 6: Environmental cleanup can slow real-estate gifts.

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