Is Your Nonprofit Accepting Gifts of Real Estate?
If not, you’re missing out on a very large untapped donation market.
Consider this: While most nonprofits focus on cash gifts, that cash comprises less than 10% of America’s wealth. Meanwhile, about 43% of the nation’s wealth is held in real estate … yet only 3% of that goes toward charity. That means if the Great Wealth Transfer hits its projected $60 trillion+ mark over the next 20 years, about $25 trillion of that will be wealth held in real estate.
Trillion. With a “T.” That’s a literal fortune in untapped potential.
A Powerful Philanthropic Tool
We always say that planned giving is philanthropy for the rest of us. That’s because it allows almost anyone to make a significant gift without affecting their day-to-day cash flow. Gifts of real estate are a perfect example of this, because for the majority of people, their most valuable asset is their home.
But residential homes are just one type of real estate that can be donated. Other types include:
- Farmland
- Vacation homes
- Rental properties
- Commercial buildings
- Industrial property
- Vacant lots
- Historic structures
- Apartments
- Condominiums
- Acreage
- Multi-family homes
Even better, most real estate can be donated in such a way that the owner, or someone they designate, can continue to use the property for an agreed-upon period of time—in some cases, for life! The property does not even need to be mortgage-free.
And in many cases, the property does not even need to be in prime condition, or even debt-free. Depending on the nonprofit’s policies, you may be able to donate a fixer-upper, or even a property that has a lien on it.
Yet real estate is often overlooked when it comes to philanthropy. That’s usually because:
- Donors and nonprofits alike focus on cash gifts
- Donors don’t know they can give real estate
- Those who do know think it’s too complicated
- Nonprofits fear the technical details, but are hesitant to outsource to experts
Benefits of Donating Real Estate
Donating real estate to charity carries a number of substantial benefits for the donor.
- Donors can deduct the property’s value from taxable income, usually up to 30% of their adjusted gross income.
- Donors can eliminate capital gains tax if the property has grown in value, meaning a larger portion of a property’s value goes to charity than if the donor were to sell the property before donating the proceeds.
- Donating real estate removes it from your estate plan, meaning your heirs will face less of a tax burden.
- A gift of real estate can give many donors the satisfaction of making a much bigger impact than if they’d donated cash or other assets.
- Depending on how the gift is structured, the donor can continue to live in or use the property for life through a Retained Life Estate.
How Does a Real Estate Donation Work?
A supporter can donate real estate in several ways:
- As an outright donation
- As the donation of a fractional interest in the property
- As the asset to fund a gift plan that will pay them income, such as a charitable unitrust
- By donating their home, while at the same time reserving the right to continue living there for their lifetime or for the lifetime of someone else, such as a spouse or sibling (a retained life estate).
Remember that real estate donations must be reviewed by the nonprofit to evaluate the condition and marketability of the proposed gift to determine whether it is risk free and appropriate for all parties. The IRS also requires that the gift of real estate must first be appraised by a qualified, independent appraiser.
Accepting gifts of real estate can make an incredible, transformative impact for your nonprofit. There are only two questions left to answer:
- What are you waiting for?
- How do you begin?
There’s no excuse for #1. We can help with #2.
How and Where Do You Begin?
Gifts of real estate are usually ignored by smaller nonprofits (in reality, by most nonprofits) because there can be risk involved. We work with Chase Magnuson, who facilitates such gifts and has the complete infrastructure to carry them through from beginning to end. It is all done virtually risk-free to charity.
We have known Chase for 18 years. He has served small to larger organizations. Current and immediate past clients include AARP Foundation, UNICEFUSA, California State University San Jose and Dominguez Hills, and United Way San Diego. just to name a few.
Contact us today to see why our process is risk-free, and what it takes to begin. We’ll even handle the marketing for you.
