Giving real estate: Part 2

By Todd Cohen

While it might have considered a real estate gift in the past, the Greater Kansas City Community Foundation was not actively marketing real estate gifts to donors, says George Bittner, vice president for advanced giving.

And even though it was beginning to see “real estate represents a significant bloc of assets that Americans own,” he says, the foundation was “not prepared to accept them.”

So instead of simply reacting to donors who suggested making gifts of real estate, the foundation four years ago created the Real Estate Charitable Foundation as a supporting foundation.

The foundation’s 11-member board includes lawyers, accountants and residential and commercial real estate professionals.

In addition to reviewing and accepting or declining gifts, and managing and selling property, the board aims to let donors and professional advisers such as lawyers, accountants and estate planners know “we were in the business of accepting gifts of real estate,” says Bittner, who also serves as executive director of the Real Estate Charitable Foundation.

This year, the foundation expects to be involved in real estate transactions worth about $15 million.

Princeton is relatively unusual among colleges and universities in having created its own team of experts who work on real estate matters, including gifts, says Ronald Brown, director of planned giving.

The school’s real estate committee is chaired by the university treasurer and includes the head of its real estate office, an environmental engineer, a real estate broker, a university counsel and Brown.

That team can advise the development office on potential gifts of real estate, such as the alumnus’ highly appreciated vacation property, the school’s biggest real-estate gift ever.

The school only learned about the property when, during talks the alumnus initiated about his proposed bequest, he mentioned he had purchased a home on an island in the Atlantic Ocean about 15 years earlier for $1.5 million.

Princeton learned not only that the alumnus’ children had grown and no longer wanted to spend vacations with their parents, but that the value of the property had grown to $12 million.

After development officials suggested he consider giving Princeton the property through a charitable trust, and after he talked to his lawyer and financial adviser, he decided to make the gift.

In making the gift through a charitable trust, the donor avoided $2 million in taxes on the capital gain in the property, and received a deduction of $1.6 million on his income tax.

The trust will make annual payments to the donor and his wife equal to 6 percent of the value of the trust, or $700,000 a year, until they die, when Princeton will receive the remainder.

And the trust can invest the proceeds from the sale of the property in a “very diverse portfolio that provides a broader investment pool that just holding real estate,” Brown says.

Real estate gifts also can free donors from expenses such as upkeep, taxes and insurance related to property, he says.

So everybody wins, Brown says.

“The donor is able to make a very significant gift to a charity that the donor cares about,” he says, “and the charity in turn receives a gift that’s probably the largest that donor is capable of making.”

Other stories in the series:

Part 1: Real estate gifts pose challenge for donors, charities.

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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