Many people who own highly-appreciated residential, commercial, or undeveloped real estate may have reached the point where they no longer want to manage or maintain it. This is a perfect opportunity to discuss the option of giving real estate to a donor-advised fund or other type of fund at the community foundation.
As with gifts of other long-term appreciated assets, a gift of real estate to a donor-advised fund at the community foundation avoids capital gains taxes and generates more money for charitable causes than selling the property first and donating the proceeds.
A fund at the community foundation can receive a tax-deductible gift of real estate in a variety of ways. An outright gift is always an option; lifetime gifts of property held for more than one year are deductible for income tax purposes at 100% of the fair market value of the property on the date of the gift, which also avoids capital gains tax and reduces the value of the client’s taxable estate. Other ways to give real estate include a bargain sale or a transfer to a charitable remainder trust which produces lifetime income.
A gift of real estate to a fund at the community foundation can help address the emotional challenges associated with letting go of an asset that in many cases has been in the family for generations. By donating real estate to a fund at the community foundation, a client can work with the foundation to extend the emotionally important, family-related dynamics that were previously linked to the property, even after the foundation sells the real estate and the client’s fund holds the proceeds. For example, multiple generations of family members can serve as advisors to the fund and collectively recommend grants to charities that carry on the values held by the family during the years it held the property, such as funding housing initiatives, providing agricultural scholarships, or promoting land conservation, just to name a few.
If you have any questions about gifts of real estate, or charitable giving in general, send us an e-mail at giving@arlcf.org or call us at 703-243-4785.