Real estate has been an excellent long-term investment for many, with the common rule being that no more than 25% to 40% of net worth should be invested in real estate. Not to mention residential property is the world’s oldest and largest asset class – and residential real estate is the overall largest U.S. asset class. According to San Diego Foundation, it comprises 43% of total wealth in the U.S., yet less than 3% of total charitable giving comes from gifts of real estate.

Why such a massive difference?

It could be because charitably minded people simply do not realize how powerful an asset real estate is and the impact that it can have toward helping fund their favorite causes.

When Is a Real Estate Donation the Right Choice?

A real estate donation starts with asking the owners the following questions:

  • Are they not currently using this property?
  • Does the property fail to meet their investment objectives?
  • Does the property fail to meet social objectives? (i.e., Is it a family vacation home that is used infrequently?)
  • Would a large capital gains tax be due if they sold this property?

If the answer is “yes” to any combination of these questions, the property may be a good candidate for gifting.

Donating a Property Through Donor-Advised Funds (DAFs)

DAFs are among the fastest-growing charitable giving options in the country. They allow individuals to donate, receive an immediate tax benefit, recommend investments to potentially grow the assets, and recommend grants to eligible charities from the fund over time.

DAFs can accept a wide range of contributions—from cash and publicly traded securities to more complex assets like illiquid or alternative investments. By donating appreciated real estate to a DAF, the donor can earn generous tax benefits, support their favorite causes, and free up time for other pursuits.

American Endowment Foundation (AEF) is a public charity that enables donors to open DAFs. AEF administers the fund on behalf of the donor. The donor can then recommend grants to qualified nonprofit organizations on their own timetable. The donor’s financial advisor can remain involved in managing the investment dollars that reside in the DAF account.

How Real Estate Donations Work With DAFs at AEF

AEF will partner with another 501(c)(3) nonprofit organization to accept gifts of real estate. While we may not accept gifts of illiquid assets directly, a partner organization will do so on our behalf—quickly and efficiently—with the same immediate tax benefits to the donor.

Currently, AEF is partnered with Dechomai Foundation, an organization that is dedicated to helping charitable institutions accept and liquidate non-cash assets like real estate. This partnership allows us to accept a wider range of gifts with no impact on our best-in-class client experience.

For potential donors with a large portion of wealth tied up in real estate, being able to gift these assets with ease is vital. Being able to accept such donations opens up more philanthropic opportunities. If you have any questions about donating real estate through a DAF, don’t hesitate to contact AEF. Together, we can expand philanthropy.