Attracting Real Estate and Other Non-Cash Gifts for Endowment and Stewardship

by Dennis Bidwell
October 2013

Land conservation organizations are especially well-suited to develop robust Legacy Giving programs (I prefer that term to “planned giving”)  emphasizing real estate gifts.  I truly believe that such efforts hold the prospect of long-term financial security and permanence for these organizations through endowments and stewardship funds. Why? Three reasons.

First, land trust can make a better argument than almost any other organization for having to be around forever. Land trusts, after all, exist on the premise that land owners can entrust to them the permanent protection of their land.  Asking for funds to assure the permanent stewardship of land matches up very nicely with the motivations of people wanting to assure a legacy – for themselves and for landscapes of meaning.

Second, with more U.S. household wealth in real estate than in any other asset class, property gifts of all sorts are an especially important component of Legacy Giving programs. And conducting real estate transactions is one of the core competencies of land trusts. When land trusts turn their real estate expertise to structuring and closing gifts of non-conservation real estate (think vacation homes, ski condos, apartment buildings, etc.), they have put themselves on a path toward long-term financial security.

Third, an essential feature of successful planned giving programs is the long-term cultivation of personal relationships with donors. In the course of working with property owners and other community members to bring permanent protection to land rich with history and meaning, land trusts develop especially close and trusting relationships.  These relationships often deepen over time, with the potential to produce enduring, sometimes transformational, gifts.

More and more land conservation organizations are learning to talk with donors about the whole menu of gift techniques – outright gifts, bequests, charitable remainder trusts, charitable gift annuities, retained life estates, fractional interest gifts, etc.  And they growing more skilled at discussing their donors’ whole range of assets – real estate of various types, securities, retirement plans, insurance policies, business interests, etc. – in order to help aging members and donors dispose of assets no longer needed. The result of this process of inquiry and problem solving many times results individuals and families realizing they have charitable capacity they never thought they had.  When this happens, it brings joy and satisfaction to all involved.

Case Study Conservation Easement → Retained Life Estate → $3 Million of Sales Proceeds

by Dennis Bidwell
October 2013

Take-aways from this gift scenario:

  1. Anytime a donor or property owner indicates they might be leaving your organization an interest in real estate through their will, you should acquaint them with the pros and cons of the retained life estate as a way of accomplishing essentially the same thing, but with extra benefits.
  2. Conservation easement stewardship visits should be regarded, among other things, as an opportunity to deepen relationships with the property owners. And land trust representatives on such visits should be trained to keep their eyes and ears open to hints of other possibilities.
  3. People will seldom give your organization a property unless they know your organization is interested in real estate gifts and knows how to handle them.

In the 1990s, Owen and Ellen Love donated a conservation easement on their 662-acre farm in Kalamazoo County, Michigan to American Farmland Trust. Besides being proud of protecting the prime agricultural soils on their farm, they received a substantial charitable donation deduction which they used to offset some of their farm income for several years.  A few years later, on an otherwise routine easement monitoring visit,  Owen and Ellen hinted that they were re-thinking their wills, based on dissatisfaction with the university they originally hoped would receive their farm by bequest.  Conversations led to the possibility that the farm might be left instead to American Farmland Trust.

In the months that followed, I worked with Owen and Ellen, their advisors, and their children, to explore the pros and cons of a bequest gift of the farm versus a life-time gift of the protected farm, subject to a retained life estate.  In the end, the Loves decided to deed away the farm during their lives, retaining the right to live on and rent the farm for the rest of their lives. They were motivated by two things made possible by a retained life estate gift that aren’t possible in a gift by bequest: 1) a substantial income tax deduction they could claim at the time of the gift (which, based on actuarials, amounted to about 75% of the value of the easement-restricted property); and 2) the satisfaction of knowing that during their lives they had made a hugely significant gift for land conservation that might inspire others to follow suit.

In the years that followed, Owen, then his beloved wife Ellen, died.  After some years of renting the farm to a local family, AFT sold the easement-protected farm, in 2010, to another local farm family.  The bulk of the $3 million of sales proceeds funded the Owen and Ellen Love Revolving Fund for Farmland Protection.