There are many types of assets that are donated to charity, but advisors and their clients often do not consider real estate to be one of them. In fact, of the $485 billion that was donated to charity in 2021, less than 2% came from gifts of real estate. This is often because many charities do not ask for real estate donations since they cannot accept it themselves. Fortunately, AEF has accepted real estate donations for many years.

Real Estate Donation

Because of the behaviors of the markets in past years, many clients have been looking for highly appreciated assets that they can donate. Their options may be more limited since many asset types have dropped in value, yet real estate has remained very strong after years of increasing in value. As a result, different types of real estate are being donated, including primary and secondary homes, commercial properties, and raw land. These real estate contributions to donor advised fund sponsors have enabled clients to increase the amount that they are able to grant to their favorite charities now and in the future.

Bruce Geiss, co-founder of Realty Gift Fund, and one of AEF’s partners that accepts real estate donations, indicated that their average size real estate gift last year was $600,000, and that the average size grant to fund a donor’s DAF from resulting net sale proceeds was 94%. Bruce said that “a charitable gift of appreciated real estate works for donors of all wealth profiles and rewards financial advisors willing to recommend the concept.  As a result, we encourage advisors to look thoughtfully at their clients’ real estate portfolio for unused hard assets that can be converted to cash– tax free–” Once the process has been completed, the cash proceeds will be available for the donor to donate through their DAF.

The donation is sometimes the entire piece of real estate, while other times it is a partial interest. Regardless, real estate is America’s largest asset class and has long been neglected as an asset that can be donated and converted into charitable dollars.

As with other donations of illiquid assets, donors may be eligible for an immediate federal tax deduction equal to the Fair Market Value (FMV) of the entity donated, up to 30% of the adjusted gross income (AGI). If the FMV of the donation is greater than 30% of AGI, the excess can be carried forward for five years.

Donating real estate through AEF and its partners allows for management of the complete donation cycle including IRS documentation, and provides many benefits to the donor, their advisor, and the charities that the donor supports.

At American Endowment Foundation, we look forward to discussing you and your clients’ needs and determine if a donor advised fund and a gift of real estate is your best choice for planned giving. Contact us or call 1-888-660-4508.