Choosing Real Estate Donations as a Profitable Form of Charity

Choosing Real Estate Donations as a Profitable Form of CharityNine years ago, The New York Times shared the story of Sidney and Elisabeth Garvis, a couple who shared a lifetime together, with memories of their lives filling their small 4.5 acre cottage located on Block Island, Rhode Island. When they purchased the home in 1965, it cost them just $20,000, and it was primarily used as a vacation home and a destination for entertaining weekend guests.

When they decided they wanted to move in 2004 because the upkeep became overwhelming, they realized they had no one to pass the property along to. Also, they recognized that selling the home, would mean they’d be responsible for a costly capital-tax. The couple had no children, just a niece and nephew who were indifferent to the home, so decided they would give the home to a charitable foundation. In doing so, they learned that it paid to good deeds. After property sold for $1.1 million, the couple, now dwelling in a senior community in Bloomfield, Connecticut, began lifetime annuity received on a monthly basis, as well as significant tax savings. When they chose to make the charitable donation, they were merely content knowing that donation could benefit causes important to their heart, such as health care reform.

Any type of real estate asset, whether that be warehouse or townhouse, can qualify as a charitable donation and given to organization. The gifts can be structured by estate planners, who can help to educate interested parties about tax benefits and income. While some nonprofits shy away from real estate donation, others recognize that property values continue to soar. If the Garvaises’ home was sold in 2016, it would have sold for far more, winning a fortunate charity even more financial support. Established foundations and planned-giving departments are now working with consultants to help with these transactions. Donations of this kind tends to spike at the end of the year.

Real estate is considered to be a great untapped source for donations, according to philanthropic experts. Baby boomers with secondary or inherited homes, as well as homeowners who are interested in stable incomes may want to consider donation. As a donor, they can convert their donation into an income stream. Developing a charitable remainder trust is one way one can give, so they can receive a lifetime annuity and tax deductions equal to the value of the property. Also, they can avoid federal capital-gains tax. When donors die, remaining assets in are transferred to the charity. The trust can be based on the annual valuation of assets, and charitable remainder trusts can be set that only ten percent of the present value goes to charity. Additionally, real estate investors can be used for donations to offset gains in other properties they might sell.

Those interested in donating their homes should seek out the advice of individuals educated in philanthropy law. Many, like the Garvaises, find it better to donate their entire property and get a large annuity, allowing to pay living expenses. Donors often transfer titles to a charity, taking the full appraised value of the property. This eliminates brokerage fees and capital gains.

It should be kept in mind that not all organizations are equipped to handle estate transaction, and charities can be picky. Some may decline properties with debt or environmental problems. It’s estimated that charities reject 80 percent of all non-cash assets offered.