Real Estate Gift Trends – Survey Results, 2013

by Dennis Bidwell
August 2013

1.  Trends in real estate gift activity in recent years

About 17% of respondents reported an increase in real estate gifts in recent years, while 83% reported receiving about the same number of real estate gifts. No respondents reported a decline in real estate giving.

Commentary: As gifts of cash and securities were hard to come by during the recession, development shops increasingly turned their attention to attracting other assets, most notably real estate. Now that the economy is coming back to life, and development activity is picking up, those same development shops – having acquired a greater comfort level with real estate gifts – continue to pursue the considerable opportunity represented by real estate assets.

2.  Sources of real estate gifts

By far and away the most effective way of attracting real estate gifts, according to survey respondents, was “conversations initiated by our organization’s gift officers.” Complete responses:

Conversations initiated by our gift officers……..73% have attracted gifts this way
Referrals from professional advisors……………27% have attracted gifts this way
Responses to information on our website……..9% have attracted gifts this way
Responses to mailings…………………………..9% have attracted gifts this way

Commentary: This tracks completely with my experience in the field, where I find that the non-profits enjoying consistent success with real estate gifts tend to train their gift officers to engage in conversations with their donors about their real estate holdings, knowing they have expertise backing them up if a real estate gift opportunity surfaces.

3.  What motivates real estate donors?

This survey showed the same results as every survey where I’ve asked this question. A desire to be unburdened from the hassles and expenses of real estate as one ages ranks very close in importance to the other major motivators: desire to support the mission of the organization, and the tax benefits of giving. Complete results:

Desire to support the good work of our organization……75% of respondents
Desire to use the tax benefits resulting from a gift……..75% of respondents
Desire to be unburdened from the hassles and
     expenses of continued ownership………………………..58% of respondents
Desire to generate life income with the gift…………………33% of respondents

Commentary: Organizations that attract good real estate gifts increasingly use a marketing message that appeals to aging property owners looking to get out from under the responsibilities of ownership with as little effort as possible.

4.  In what form are real estate gifts most often coming to you?

Results:

Bequests……………………..64% of respondents
Outright gifts…………………45% of respondents
Retained life estate gifts……36% of respondents
Life income gifts……………..27% of respondents
Fractional interest gifts……..9% of respondents

Commentary: Notable here is the frequency of outright gifts, which tracks with my experience. I find that too often gift officers — especially gift planning officers – make an assumption that the donor will want to give away something less than the whole property, and move right on to discussions of charitable remainder trusts, etc. In fact, many, many donors have the capacity and the motivation to give away properties outright. Also notable is the frequency with which retained life estate gifts are reported. I have always thought such gift structures were way underutilized in relation to the situations where they were appropriate.

5.  What types of property are most frequently being gifted?

Results:

Vacation home……………………………..60% of respondents
Investment/rental residential property……50% of respondents
Primary home………………………………40% of respondents
Commercial property………………………20% of respondents
Farm or ranch………………………………10% of respondents
Industrial property………………………….10% of respondents

Commentary: No surprises here. Vacation homes and other non-primary residential properties are almost always the most promising target for development officers in search of real estate gifts.

Conclusion

Very few good real estate gifts just walk in the door of development offices. The good ones come as a result of a purposeful plan: clarity in gift acceptance policies and procedures, smart and targeted marketing, training gift officers (and others) to initiate real estate conversations with donors, offering a large menu of gift structure options, and having access to the expertise to tailor real estate gift solutions to the particular situations of motivated property owners.

The Bargain Sale, and When to Use It

by Dennis Bidwell
April 2013

In my experience there are many property owners with the motivation and financial capacity to make an outright gift of their real estate. That is why I always urge development officers to begin conversations with a prospective property donor with the possibility of an outright gift. When it becomes clear that the donor isn’t in a position to make an outright gift, but could make a partial gift of some sort, there are many different directions to go in at that point.

One of those directions—and one that is quite underutilized, in my experience—is the bargain sale. Not all donors wanting something back as part of the gift arrangement need to have someone else invest funds on their behalf for purposes of making period cash payments, i.e. charitable remainder trust or charitable gift annuity. Often such a donor would be quite delighted to receive a lump sum cash payment.

Enter the bargain sale. A property owner selling their property to an exempt non-profit organization at a price below the appraised fair market value of the property is entitled to a charitable deduction for the difference between the sales price and the appraised value. The deduction from this gift portion can often be used to offset some or all of the exposure to capital gains tax on the sale portion of the transaction. A charity contemplating such a transaction will need access to working capital to cover its purchase price and holding costs prior to the time it sells the property (unless simultaneous sales are arranged.)

Some non-profits are able to use cash in an endowment fund for such a purpose. And some charities, facing the need to come up with cash for the initial purchase, have had success in going to donors to ask for a short-term loan to cover the purchase cost.  It’s a loan that would be returned when the property re-sells.  Some friends of the organization are delighted to see their funds leveraged in this way.  If a donor is told, for example, that their short-term loan of, say $100,000, will make it possible for a net gift to the organization of $150,000, they might find this very appealing.

Technically, a charitable gift annuity funded with real estate is a form of bargain sale, where the “sales price” for the asset being “sold” is the value of the CGA contract. Similarly, the donation of property subject to mortgage is considered a bargain sale, because the non-profit’s agreement assume responsibility for the debt is the bargain “payment” made by the charity.

These are among the situations where I have seen a bargain sale work well for all involved:

  • Some property owners are eager to part with their property but dreading the marketing process. Some such owners are delighted to take considerably less than market value for their property in exchange for having the charity handle the marketing and the satisfaction of knowing they have made a meaningful gift.
  • Other property owners need a lump sum of cash (rather than a stream of income) for things like children’s’ weddings, purchasing other real estate, family travel, etc.
  • And some property owner would rather go through their existing investment relationships to generate income than have funds invested by a charity on their behalf.

A bargain sale can also be a very useful tool for organizations looking to acquire property for their own use at a discounted price. Land trusts seeking to acquire conservation-worthy property, and housing organizations  looking to acquire property for development as affordable housing, have enjoyed success in  offering a property owner a combination of discounted sales price and tax deduction as an alternative to negotiating with full appraised price as the starting point.

A very recent U.S. Tax Court decision confirmed that certain elements must be in place for the bargain sale to trigger a charitable deduction: 1) an acknowledgment letter from the charity stating that the charity paid $X for the gift of the property; 2) a qualified appraisal commissioned by the donor/seller; and 3) evidence of donative intent.
See https://www.ustaxcourt.gov/InOpHistoric/Boone3.TCM.WPD.pdf.

My advice to gift officers talking with property owners who have indicated a readiness to part with their real estate:  After pursuing the outright gift possibility, keep the bargain sale possibility in mind!

Bargain Sale Case Study: A Washington DC Condo and George Washington University

by Dennis Bidwell
April 2013

Take-aways from this gift scenario:

  • Approval of this gift involved various departments at George Washington University: Planned Giving, Risk Management, Legal, Facilities Management, CFO, and Vice President for Advancement. It all worked smoothly because GWU had previously invested time in thinking through the procedures for evaluating and accepting real estate gifts such as this.
  • The gift was made possible by GWU’s access to $1,000,000 of “working capital.”  It turned out to be a pretty good use of capital: a return of 75% on a $1,000,000 investment, in four months time.
  • Word of this transaction is working its way through the Capitol Area brokerage community. GWU has already received other inquiries about bargain sales.

In mid-2012 George Washington University was contacted by the owners of a very large penthouse condominium in Washington, DC –  a GWU alumna and her sister.  The owners had consolidated what had previously been five separate units, and extensively renovated their enlarged unit in the 1980s. The donors’ recent appraisal valued the property—including four parking spaces—in excess of $2,000,000.

The donors understood that there was a way to make a partial gift of their condominium to the university, so that they could emerge with some cash on their part.  The parties agreed that a bargain sale would work for all involved. For the donors it would provide a lump sum of cash, a substantial charitable deduction, and reduced capital gains exposure. The arrangement would also relieve the donors of the hassle of marketing the property themselves.

Once there was a meeting of the minds as to the basic terms of the gift, GWU undertook extensive due diligence, including a home inspection, a Phase I environmental assessment, and a life safety inspection.  GW also commissioned its own appraisal.

Once due diligence investigations proved satisfactory, the parties proceeded to closing. In December, 2012, the university paid the owners $1,000,000 for their property, using funds from its General Fund. The difference between that sales price and the appraised value determined by the donors’ qualified appraisal will be treated as a charitable contribution by the donors.

GWU immediately listed the property for sale, and found a motivated and qualified buyer in fairly short order.  In March, 2013, the university sold the property for $1,900,000.

In the end, the net value of the gift to GWU was about $750,000—the $900,000 difference between their purchase price and their sales price, less about $150,000 in expenses (realtor fee, due diligence costs, transfer taxes, closing costs, etc.)

–  Thanks to my colleague Chase Magnuson at GWU for providing the basic facts of this case study.

Real Estate Gift Training for Development Officers: One Part of Ramping Up Real Estate Gift Activity

by Dennis Bidwell
March 2013

Over the years I have been asked to provide training on one aspect or another of real estate gifts for numerous institutions. I’m always pleased to do so, because I enjoy helping more and more development professionals become comfortable initiating conversations with prospects about their real estate holdings and the philanthropic capacity represented by those properties.

But I’m not always convinced that such training sessions, in and of themselves, are all that helpful. Why?    

Because, if not part of an ongoing effort to attract, structure and close real estate gifts, a training session on real estate gifts can easily become just one more set of notes and one more PowerPoint printout that goes into the files of a busy gift officer.

On the other hand, I have seen numerous instances where such training sessions proved to be quite effective.  At the organizations where such training sessions really paid off (meaning they led to completed real estate gifts), the training sessions were part of a sequence of events that typically include the following:

  • Review of gift acceptance policies and procedures, incorporating best practices regarding real estate gifts. Before training gift officers about real estate gifts, it makes sense to be totally clear on what sorts of real estate gifts the organization will and will not accept, and to be clear on the who-does-what within the organization when a gift possibility materializes.
  • A fresh look at marketing approaches. Real estate gift inquiries rarely materialize out of thin air. They are usually prompted by an organization letting its constituents know that they are eager to talk to people about their real estate and its gift possibilities.
  • Prospect research. Because we know so much about the profile of a likely real estate donor, it makes sense to focus some prospect research activity on the task of identifying good candidates for real estate gifts. Often, the prospects that surface through this process are prospects that hadn’t previously appeared on an organization’s radar screen.
  • Gift officer training. Good gift officer training can: help staff (and board members) identify a potential real estate gift situation that is staring them in the face at a cocktail party; provide an overview of the different structures appropriate for different donor situations; help develop a comfort level with initiating a real estate conversation as part of a donor visit.
  • Coaching. Training sessions can really pay off when combined with the ongoing availability of a consultant or coach who can offer technical support and strategizing advice to a gift officer starting to work with a potential real estate donor. Some organizations have taken this a step further and required all gift officers to be prepared at least twice a year for a conversation about a specific possible real estate donor and their situation.
  • Transaction assistance. Some organizations have the capacity in-house to handle real estate gift transactions, start to finish. Others need to identify the outside resources that can be on-call when real estate gift situations arise.
  • Metrics.  I am aware of a few development shops that have included “real estate gift conversations” and “real estate gift proposals submitted” in the metrics they use in evaluating gift officer performance.

The point here is that real estate gift officer training is a necessary, but not in and of itself a sufficient, step in increasing the quantity and the quality of the real estate gifts being accepted by a non-profit organization. The real payoff comes from the carefully designed steps that precede, and that follow, gift officer training sessions.

Debunking Six Myths about Real Estate Gifts

by Dennis Bidwell
November 2012

Myth #1: If a property owner is offering a piece of real estate as a gift, there must be something wrong with it.  Most of the time this is simply not true. These days property owners are exploring giving away perfectly fine pieces of real estate because: 1) they have grown weary of continuing to own and manage a property — often a vacation home — they no longer use; 2) they are wary of marketing the property themselves; 3) they like the idea of making a wonderful gift while retaining their cash; 4) they can use the substantial charitable contribution deductions triggered by such a gift, and then like avoiding  or reducing the capital gains taxes that might have been payable in the case of a sale.

Non-profits that have ramped up their real estate gift activity have grown very good at quickly deflecting the problematic gift offerings, and spending their time instead on the promising real estate gift possibilities. Also, charities that actively pursue real estate gifts – through marketing and by initiating conversations with prospects – tend to see a much high quality of property offered up than those who don’t market and see only the occasional, often problematic, property that is sometimes being shopped around.

Myth #2: The staff time and upfront expenses of evaluating and structuring a possible real estate gift just isn’t worth it. In the latest IRS report on non-cash charitable gifts (2009), the average real estate donation for donors 65 and older (the bulk of real estate donors) was reported as $585,000. Yes, real estate gifts can be time-consuming and require some investment in due diligence investigations. And yes, not every gift explored makes it across the finish line. But, I would argue, the magnitude of real estate gifts more than justifies an investment in ramping up a carefully thought-out real estate gift effort.

Myth #3: Most gifts of real estate are deferred in some way, meaning we won’t have cash to use for many years.  In fact, surveys show that more real estate gifts these days are given outright than through life income arrangements or subject to retained life estates. Outright gifts are often liquidated and fully useable by the charity in a matter of months.

Myth #4: Most property offered as a gift has a mortgage on it.  This is not true. The vast majority of property offered as a gift of some sort is offered by donors over 65 years of age. And we know (from the Statistical Abstract of the U.S.) that 83% of the real estate owned by folks 65 and older is debt-free.  In situations where a property is encumbered with a mortgage, there are often work-arounds making it possible to complete the gift nonetheless.

Myth #5: Property owners are resistant to having development officers talk to them about their real estate holdings. To the contrary, it is my experience that many aging owners of property welcome fresh new ideas about how they might dispose of real estate that is weighing on their minds. When a non-profit representative presents the outright gift possibility, or life income arrangements, or a retained life estate as a possible approach to a dilemma, the property owner often welcomes the introduction of new possible solutions. Whether a gift results from such conversations or not, it is my experience that the prospect usually appreciates the suggestions.

Myth #6: You should never accept real estate as the asset funding a Charitable Gift Annuity. The traditional reluctance to fund CGAs with real estate is gradually giving way to the realization that many property owners want to convert “non-performing” real estate assets into supplemental retirement income, but would only do it if they could lock in a return (as opposed to being exposed to the market variability of a real estate-funded Charitable Remainder Trust.) This transition is aided by the availability of various proven techniques for avoiding the liquidity risk associated with real estate-funded CGAs. Among these techniques: marketing of the property prior to the charity taking title; deferring the CGA one or more years, to allow ample marketing time; using a “charitable put option” to identify a qualified buyer prior to issuing the CGA contract; and making downward adjustments to the CGA payout rate to reflect the estimated holding costs and other expenses of working through the CGA arrangement.

Case Study: Outright Gift of Florida Condo Funds Bryn Mawr Scholarships

by Dennis Bidwell
November 2012

Take-aways from this gift scenario:

  1. Many donors have the capacity to make outright gifts of real estate, which can be converted to cash and put to use in a very short period of time.  For this reason real estate gifts are being pursued as often by major gift officers and principal gift officers as planned gift officers.
  2. A condominium association will often be quite cooperative in facilitating the gift and resale of a condominium property.
  3. Florida properties owned by Northeast residents can make wonderful gifts. Many institutions have generated real estate gifts by discussing the vacation homes, in Florida and other states, owned by their aging alums.

In the fall of 2010 a Bryn Mawr major gifts officer was visiting an alumna — a 70-year old successful New York judge and lawyer – who mentioned in casual conversation that she was no longer using her Broward County, Florida seaside condominium.  The gift officer raised the possibility of gifting the property. Because the grateful alum was hoping to make a significant gift to the College, she liked the idea, particularly if the donation could happen by year-end. She said “I had always hoped to make a substantial contribution to Bryn Mawr and express my gratitude for the excellent education that contributed to the professional success I have achieved.” She was very much aware of recent declines in the Florida condominium market, but trusted Bryn Mawr to sell the property at the best price attainable given current market conditions.

A team was quickly assembled: an attorney to arrange a title search and handle conveyances, a broker to help determine market value and to implement a marketing strategy, and a building inspector.  No problems with title, marketability or building conditions emerged from these due diligence inspections. College officials agreed to accept the property gift, but couldn’t guarantee that the gift would be completed by year-end.

Meanwhile, the property owner commissioned her own appraisal, to substantiate the charitable deduction she expected to take on her current year’s tax return. She also facilitated discussions with representatives of the condominium association, whose approval was required both for the donation to the College, and for the College’s sale to a new owner.

Once the condo association’s approval was in hand, the property was deeded over to the College, in December, and the donor’s IRS Form 8283 was completed by her appraiser and CPA, and signed off on by the College. The College assumed responsibility for property taxes, condo fees, and for looking after the property.

Marketing of the property began immediately, with an initial emphasis on other owners within the seaside building.  After several months, mailings and print advertising were used to generate additional interest in the property, which sold in April of 2011.

The donor is thrilled that her gift could be put to work immediately funding scholarships.  She said: “During challenging economic times, students will be able to complete their education uninterrupted and unburdened.  Making this gift gives me great satisfaction, knowing that I am extending the Bryn Mawr experience to future generations of young women.”

Leadership Real Estate Gifts

by Dennis Bidwell
September 2012

Let’s assume you are revising your gift acceptance policies and procedures to clarify which types of real estate gifts your organization will accept, and to streamline your process for handling them, including a donor-friendly approach to gift screening and due diligence. And let’s assume you’ve figured out the profile of a likely real estate donor to your organization.

Typically, development of a marketing program—web presence, newsletters, magazine advertising, etc.—would be a next step in the process of increasing the quantity and quality of the real estate gift inquiries you receive.

But I want to suggest an intermediate step that has worked at many organizations. And that is this:  Identify one or more board members, or other prominent friends of your organization, who fit the profile of a potential real estate donor (65 or over, facing decisions about one of their several  pieces of real estate, children are otherwise provided for in estate planning,…), and start a conversation with them. Do you think it’s far-fetched that a real estate gift might materialize from these conversations?  Remember what the late John Brown (founder of John Brown Limited) was fond of saying:

“There’s a real estate gift sitting around the table at your next Board meeting.  It’s just that no one has ever connected the dots.”

My experience tells me this is true.  Many organizations have a near and dear friend who has given generously over the years, but who has never been approached about their property holdings. And when such people are approached about whether the timing might be right to consider a gift in some fashion or another, they sometimes reveal that not only is the timing right to dispose of a property, but they would be honored to make a “leadership” gift that can serve as inspiration to others to consider doing something similar.

When a gift like this closes—and it won’t happen unless someone works to make it happen—your organization then has the perfect story for a marketing effort. Then your real estate gift ads aren’t hypothetical case studies. Rather, they tell the real story of a prominent friend of the institution.

So I encourage you to convene a brainstorming session of a few folks with long-term institutional memory and knowledge, with familiarity with your board members (and others closely associated with the organization), and to generate a few possible candidates for the real estate gift conversation.

Believe me, real estate gifts do happen this way. Just give it a try.

Case Study: Real Estate-Funded Charitable Gift Annuities at Kendal Retirement Communities

by Dennis Bidwell
September 2012

Take-aways from these gift scenarios:

  1. Real estate-funded CGAs are attractive to many property owners wary of variable CRT payouts.  Also, the relative simplicity of a CGA contract, compared to a lawyer-intensive CRT document, is appealing to many donors.
  2. Many residents of non-profit retirement communities continue to own property—often a vacation home—long after they have moved in to their new community.  And many of these residents, as they move in to their eighties, are attracted to the prospect of having someone else assume responsibility for marketing their property.
  3. For non-profits, there are proven ways to manage the risk of CGAs funded with real estate. Besides deferring the CGA one or more years and making prudent adjustments to payout rates, the use of option agreements, pre-marketing and other techniques are available as risk-management approaches.

In recent years Kendal Charitable Funds (KCF), formed to support the charitable purposes of the Kendal network of non-profit retirement communities, has been offering to help communities structure, process and close real estate gifts, including charitable gift annuities. The marketing undertaken by Kendal has recently produced two real estate-funded CGA gifts that have worked out well for all involved.

The Wallaces (not their real names), residents of a mid-west Kendal community, had arrived at a point in their lives where continued ownership of their vacation home in North Carolina was more trouble than enjoyment.  With the agreement of their three children, they approached their Kendal community about donating their property in exchange for income for life.  KCF, working with the Wallaces, determined that the property was marketable and devoid of environmental issues.  Based on the Wallaces’ appraisal and local market investigations, KCF and the family agreed on the terms of a one-year deferred charitable gift annuity.  The face amount was based on the donors’ appraisal, but the rate was discounted from ACGA-recommended rates based on a conservative estimate of marketing time, holding costs and eventual sales price.  Fortunately, an abutting property owner stepped forward to express interest in the property, and KCF sold it to him without incurring brokerage costs.

When all was said and done, the Wallaces were able to turn over the marketing of their property to KCF, they began receiving their promised quarterly annuity payments one year later, they received a substantial income tax deduction, and they have the satisfaction of knowing they have made a very generous contribution to their Kendal community. At the time the CGA matures, Kendal Charitable Funds will remit to the Kendal community the balance in the CGA account, less the expenses incurred in structuring the gift at the outset.

A short time later, the Bigelows (not their real names), residents of mid-Atlantic Kendal community, expressed interest in donating their near-by home to Kendal in exchange for annuity payments for life.  Market investigations revealed that the home might require some investment before sale, and might represent somewhat of a marketing challenge. All of this was factored in to the discounted CGA rates agreed to by the parties. As with the Wallaces, the CGA was deferred one year, with a face value equal to the appraisal commissioned by the owners.  Despite deteriorating market conditions, a good local broker was able to obtain a buyer for the property, long before the first annuity payments to the Bigelows were due. The Bigelows were relieved to have KCF handle the marketing of their property, and were delighted to make a substantial gift resulting in lifetime income and a tax deduction.  As in the case of the Wallaces, KCF will remit the balance in the CGA fund, net of expenses, to the local Kendal community at the time the CGA has matured.

Kendal Charitable Funds and the Kendal communities expect that the example set by the Wallaces and the Bigelows will motivate other Kendal residents to consider similar gifts.

 

Case Study: Gift of Texas Ranch Subject to Retained Life Estate

Case Study: Gift of Texas Ranch Subject to Retained Life Estate
by Dennis Bidwell
June 2012

Take-aways from this gift scenario:

1.  A retained life estate gift can accomplish essentially the same charitable results as leaving a property by bequest, with two important exceptions:the owners are entitled to a current income tax deduction when they donate the property subject to a retained life estate (unlike a gift by bequest); and the donors can enjoy the satisfaction, and praise, for making the gift in their lifetimes, rather than such recognition coming posthumously.

2.  In the case of a property gift likely to generate a very large tax deduction, the donor can make fractional interest gifts over time, thus spreading out their tax deductions over sufficient time to enable use of such large tax deductions.

3.  The non-profit recipient of the gift, based in Virginia,  was able to assemble a team of experts to structure and close this gift in Texas.  Such expertise had its cost, but was well worth it in relation to the ultimate value of the gift.

George and Jennifer Jackson were owners of a 150-acre ranch in Karnes County, Texas, that they used on the weekends and as a base of operations for their frequent birding expeditions.  Their primary residence was on the outskirts of San Antonio.

Read more…

What is the Profile of a Likely Real Estate Donor?

What Is the Profile of a Likely Real Estate Donor
by Dennis Bidwell
June 2012

Based on survey results and years of collective experience of those of us who are practitioners in the real estate gift field, it is possible to describe the profile of the individual or couple who make substantial gifts of real estate. I venture to say that at least 80% of real estate donors fit this pattern:

  • Age 65 and older
  • They own multiple pieces of real estate, typically in multiple states
    • The more geographically dispersed the properties, and the more jurisdictions with which they are dealing (property taxes, income taxes…), the more likely they are to be a real estate donor
    • The gift property is only occasionally one’s primary residence. It’s much more likely to be a vacation home or an investment property.
  • Some of their real estate is quite appreciated in value
  • Ownership and management of one or more of their properties is becoming more burdensome than it is enjoyable.
    • Opening and closing the property every year, paying increasing property taxes, worrying about future roof replacements – the cumulative effect of this causes many second home owners to decide to dispose of their property, one way or the other
  • They either have no heirs, or their children are otherwise provided for in their estate planning
    • Typically, if there are children, they have moved away and are no longer using, for example, the family summer home on the coast
  • They have the capacity to use a considerable income tax deduction.
    • Often this is not just because of their normal adjusted gross income but also because of a pending sale of a family business, or of another appreciated property, thus triggering large gains in search of deductions
  • They have charitable motivation

And here are other situations that often lead the property owner to consider making a gift of real estate:

  • They are wary of marketing the property themselves, and having to face the emotionally-troubling reality that their property is now worth, say,  “only” $850,000, as opposed to its value of $1.2 million a few years ago.
  • They may want to supplement their retirement income by converting a “non-performing” real estate asset (i.e., an asset generating no income) into income, either through a Charitable Remainder Trust or a Charitable Gift Annuity.
  • They may want to resolve, once and for all, a long-simmering debate within the family about the fate of the shoreline property.
  • They may want to continue using their property for the rest of their lives and then gift it to a non-profit of meaning to them, but they want to generate a tax deduction now for their gift (i.e., they want to make a current gift subject to a retained life estate)

There are also ways in which real estate donors often differ from the profile of a typical planned giving donor:

  • They may not have a strong giving record to your institution.
  • They may not show up in your organization’s wealth screening.

Let me say something more about the motivation of folks who make real estate gifts. Two surveys – one of the membership of the Partnership for Philanthropic Planning and one of the membership of Planned Giving Group of New England–yielded this clear conclusion about the three principal motivations that drive property owners to gift their properties:

  • Support for the mission and good work of the organization.
  • A belief that the real estate gift would fit well with their tax-planning, i.e. they could use the deductions (and benefit from the avoidance or minimizing of capital gains exposure)
  • They are ready to get out from under the ongoing responsibilities and hassles of continued ownership and management of the property.

Significantly, this third motivation – ready to let go of the increasing hassles of owning the property – shows up as equally as important as the other two, more traditional, donor motivations: charitable intent and tax planning.

It is this motivation for many of today’s real estate gifts that suggests a critical part of the marketing message for the many organizations that have in recent years ramped up their marketing and outreach efforts pertaining to real estate gifts.

I will have more to say about such marketing and outreach activities in my next article.