Stocks and Bonds Donations

 Here is a very compelling article on the concept of "Giving Charity Through Real Estate... To get involved in this please e-mail me privately [email protected] and I will connect you with our attorney.


Giving to Charity, Through Real Estate


SIDNEY AND ELISABETH GARVAIS had a lifetime of memories tied up in their second home, a small cottage on 4 ½ acres on Block Island, R.I. They paid around $20,000 for it in 1965, and used it for summer vacations and to entertain guests on weekends. Of course, it also turned out to be one of their best investments.

But when it came time to move on about three years ago — “the upkeep became too much; there was always brush to clear, stone walls to rebuild,” Mr. Garvais explained — there was no one to pass the property along to. (Simply cashing out would mean a sizable capital-gains tax.)

With no children and only one niece and one nephew, neither of whom cared to own the place, the Garvaises decided to give it to a charitable foundation. But the couple, both in their 80s and living in a senior community in Bloomfield, Conn., didn’t leave empty-handed. In return for turning over the property, which sold for $1.1 million, they receive monthly income and significant tax savings. At the same time, they remain content in knowing that their donation will help certain causes like health care reform.

From town houses to warehouses, just about any type of real estate asset can be donated to a qualified charitable organization, and estate planners say the gifts can be structured to provide tax benefits as well as income.

Nonprofit groups once shied away from real estate, but more of them now encourage these donations, especially as property values soared in recent years. Some have established foundations or planned-giving departments, while others work with consultants to help with transactions. Many groups are gearing up for a spurt of year-end activity.

“This is the busiest time of the year for us,” said James Tarpey, the president of Donate for a Cause, a nonprofit company in Bozeman, Mont., that brokers time shares for charities. (Yes, even time shares can be donated.)

Philanthropic experts consider real estate as a great untapped source for donations. An estimated $40 trillion in property is privately held, yet only about 2 percent of all contributions each year are real estate gifts, according to Chase V. Magnuson, the president of Real Estate for Charities in Albuquerque, a consulting firm. He says real estate donations typically range from $250,000 to $15 million.

An average middle-income household whose only real estate holding is the unmortgaged portion of a home may not be in position to donate that valuable asset, but Mr. Magnuson notes that there are many others who own second homes, have inherited houses or hold vacant land and commercial property. In the next two decades, he estimates, more than $10 trillion in real estate will change hands as the population ages.

“The baby boomers will be looking for stable income” along with tax breaks, he added. “When they can convert a donation to an income stream, it’s a home run for everyone.”

One way to achieve that goal, estate planners say, is through a charitable remainder trust. Donors can receive what amounts to a lifetime stream of income. They can also get a tax deduction equal to the value of the property (less the income interest to be paid), and can avoid the federal capital-gains tax (now a maximum 15 percent rate) as well as capital-gains taxes in many states. When the donors die, the remaining assets in the trust are transferred to the charity. In some cases, income can pass on to heirs. The trusts, which are irrevocable, can be based on the annual valuation of the assets.

Options for giving can be devised to pay a predetermined annuity (at least 5 percent annually of a property’s fair-market value, and typically higher for an older donor). There are also charitable funds that allow an individual to pool donated assets with those of other donors.

“There is a lot of flexibility,” said Martin M. Shenkman, a lawyer in Teaneck, N.J., who specializes in estate planning. “You could do a part sale, part gift. You could set a charitable remainder trust so that only 10 percent of the present value is going to the charity.”

He said that some real estate investors might use their donations to offset gains in other properties they sell.

Because of the complexities of these transactions and the trusts themselves, it is crucial for property owners to get advice from people well versed in philanthropy law.

Given their ages and the limited number of heirs, the Garvaises found it better to donate their entire Rhode Island property and get a large annuity. Mr. Garvais, a retired insurance executive, and his wife receive a monthly payment of around $6,400. The income is used for living expenses — and for additional donations.

“It’s time for us to give back,” said Mr. Garvais, an active philanthropist, who was a founder of Connecticut Common Cause. One part of his gift goes to the AARP Foundation and another to the Unitarian Universalist Association.

Donors with no particular charity in mind can opt for a donor-advised fund, which can give them some say in how the money should be used and at what time. (Many donor-advised funds are sponsored by familiar investment companies like Fidelity, Vanguard or Charles Schwab; they are also offered through universities, community trusts and relief organizations.)

Robert Donathan, 56, a real estate investor from Austin, Tex., chose that option in 2004 after selling his interest in a limited partnership that owned an 85,000-square-foot shopping center in suburban Austin. Mr. Donathan said he turned over part of his proceeds to the Vanguard Charitable Endowment Program, a donor-advised fund — thereby reducing his capital-gains tax.

“People thought I was nuts for not doing a 1031 exchange,” he said, referring to a tax strategy that lets owners defer taxes on the sale of a property by rolling the gains into another property of similar value. But, he explained, “I just didn’t see anything on the horizon in real estate that I really wanted to get into at that point of time. Prices were pretty high.”

Besides, he said, saving on taxes means that “you could put that much more money into the charity.”

Perhaps the simplest way to donate is through a “straight gift.” Donors transfer title to a charity and take the full appraised value of the property as a tax deduction, eliminating brokerage fees and, of course, capital gains taxes.

They can do a “bargain sale,” in which a property is sold to the charity at below the fair-market value. The donor can deduct the difference between the fair-market value and the sales price, and the capital-gains tax is reduced.

Some nonprofit groups welcome these gifts. Alan Shaprio, the director of gift planning at New York University, says donated apartments have been used to house faculty members. And Mary Milgrom, the executive vice president for strategic philanthropy at the National Multiple Sclerosis Society, says her organization may occasionally accept rundown properties in prime locations, fix them up and sell them a for a profit.

But many organizations are not equipped to handle real estate transactions, nor do they care to be landlords. “We need cash, so we accept property that we believe can be converted quickly into cash to carry on our mission,” said Edward F. John, the vice president for planned giving at the United Way of America.

The organization works with outside consultants like Mr. Magnuson’s firm, which for a fee advises on which properties to accept and helps to sell them.

Charities can be choosy. They may decline properties encumbered with debt or environmental problems. “A lot get turned away,” said Bryan Clontz, the president of Charitable Solutions, a consulting firm in Jacksonville, Fla., estimating that charities initially reject 80 percent of all noncash assets offered. He says he has developed a sense for “sniffing out” property owners looking to “dump something on a charity,” especially now that the real estate market has softened.

Still, Mr. Clontz thinks that real estate investors are largely altruistic. “They make a lot of money in a community,” he said, “and then they want to give back.”