Real Estate Gifts Made Easy

by Chase V. Magnuson, CCIM

Appeared in Discovery a publication of the
San Diego Museum of Man (Winter, 1998)

Benefactors of Museum of Man should consider gifts of commercial and investment real estate. The Museum now has the ability to handle these donations. Donors have several gift options including bequests, charitable remainder trusts, gift annuities, pooled-income funds, and lead trusts – the latter notably used by Jacqueline Onassis.

Appreciated real estate is often a good vehicle for meeting a donor’s financial and philanthropic goals. Donors often supplement their retirement income by setting up charitable remainder trusts or by having bargain sale arrangements. An example of the latter would be a donor owning an apartment complex worth one million dollars who donates 60 percent to a charity, receiving 40 percent of the value in cash. By reinvesting the cash, the donor can receive additional retirement income. (The tax advantages in such a donation are not as great as those for an outright gift.)

Commonly donated properties include vacant land, resort condominiums, shopping centers, apartment and office buildings. By donating appreciated property, donors bypass capital gains taxes and reduce current income taxes and federal estate taxes. Donors may use some of their tax savings to purchase wealth-replacement insurance in an amount equal to the value of the donated asset. If the heirs own the policy, they owe no tax on the life insurance proceeds. However, there may be an annual gift tax due on the premiums because the donor financed the policy.

When a gift of real estate is offered, the Museum’s staff works with a team of professionals to ensure the gift’s viability. This team of commercial real estate professionals regularly deals with environmental impact studies, the Americans with Disabilities Act (ADA), wetlands issues, leases and service contracts. Their expertise makes it easier to accept gifts of real estate. The Museum has its support team in place through the Planned Giving Committee, which is connected to valuable network and business alliances. This allows donated properties to be promptly marketed nationwide.

With the federal government reducing support for cultural organizations, and with increased competition for funding from all sources, donations of real estate may help ensure that the Museum of Man will be here to serve many future generations.