Leading financial analysts proclaim that America’s second golden age of philanthropy is blossoming. The data shows real estate remains one of the most significant assets many have to leverage to achieve their philanthropic aspirations. What are the best ways for more individuals to use this capital for good, effectively?
A report from the Boston College Center on Wealth Management and Philanthropy predicts a new round of bequests hitting $6.3 trillion between 2007 and 2061. Giving the USA notes that total charitable giving in the US hit approximately $304 billion in 2009. Wealth Management reports that on average the Forbes 400 gives around 8% to 11% of their income to charity annually, and 15% to 20% of their estates. The Giving Pledge is clearly serious amping up those percentages too. Surveys show that more wealthy individuals are choosing not to spoil their heirs with large inheritances, and are adopting the “my last check before I die should bounce,” mantra.
The Billionaire Census report from UBS and Wealth-X estimates the world’s billionaire community of just over 2,000 individuals is worth around $6.5 trillion. The data shows that the average billionaire owns 4 homes, with an estimated total value of $80 million. That is likely in addition to any other real estate investments.
The Million Dollar Donors report suggests that universities continue to be among the top recipients of philanthropic gifts. That may be changing as education trends change, and wealthy philanthropists find new, more impactful ways to give. Forbes has suggested that “governments can’t erase poverty. Nor can big corporations.” Instead, hope is being placed in entrepreneurs and individual donors. Some call this social entrepreneurship, others dub it ‘philanthrocapitalism’.
1. Trusts
Trusts are a common vehicle for wealth preservation, succession planning, and giving, amongst the affluent. They can be used to invest in real estate, to hold assets, to provide easy transfer of assets to the next generation in a controlled manner, and to ensure ongoing legacy giving for generations.
2. Donating Property
With the current high point in US property values, this is a highly attractive time to give real estate and maximize tax deductions. The ‘godfathers’ of modern philanthropy often found this best done in partnership with local organizations who were willing to invest in some way as well; i.e. donating property for public libraries. Those attempting to give real estate as an in-kind donation may find it harder than anticipated. Some charities just don’t get it.
3. Liquidate and Give the Proceeds
Executed well, the property can be liquidated, and some or all of the proceeds can simply be given to a favorite cause as a cash donation. This may work well for supporting nonprofits like charity: water who puts 100% of donations to work in the field, but who has turned down real estate gifts in the past.
4. Sell Property to Nonprofits at a Discount
One of the lesser-known ways to both gift property and earn tax credits is to sell the property to qualifying nonprofits at a discount. The ‘loss’ can then often be rolled over for several years to counter any tax liability on other income or investment gains.
5. Gift Real Estate with Retained Use
Some individuals want to ensure they give the most to charitable causes as they can while they are still alive, but may not always be finished using the property; as with a personal residence or second home. In these cases, owners can gift the real estate now, and retain a life estate so that they may use the property for the duration of their lives. Provisions can be included for life estates to cover spouses, children, and other loved ones as well.
6. Gift Use, Retain Ownership
Reversing the previous scenario some property owners have no use for assets but are not sure they want to completely give up the family wealth yet either. Usage can be donated or provided under a long-term lease, i.e. 99-year leases for multi-generational assets.
7. Gift Income from Real Estate
Families who don’t need the income yields being thrown off from their real estate assets can dedicate these streams to charity for consistent monthly, quarterly, and annual giving pledges while retaining ownership of the asset itself. It’s a way to help immediately with surplus cash while preserving family wealth.
8. Gift Real Estate with Retained Income
Those who need the passive income produced by real estate investments, but who do not have heirs to leave property to may consider giving the property now while retaining any cash flow for the duration of their lives.
9. Property Rights
In addition to traditional usage real estate may have a variety of other valuable rights and assets. This may include timber rights, air rights, and oil, gas, and mineral rights. These can all be divided up. In some case the land and structures may be the most beneficial to a charity, while another for-profit organization may be able to best maximize the value of other rights.
10. Start a Foundation
Like Bill and Melinda Gates, private foundations are a common vehicle for the wealthy to fuel philanthropic goals. Through this foundation property may be given or leased for community projects, or real estate may be deeded to the foundation for use as office headquarters.
How will you do it?
A New Age of Philanthropy
The late 1800s saw a boom in philanthropy, with pioneers like John D. Rockefeller and Andrew Carnegie leading the way. Now, driven by Warren Buffett, Bill and Melinda Gates, and Mark Zuckerberg, experts say we are coming into a second golden age.A report from the Boston College Center on Wealth Management and Philanthropy predicts a new round of bequests hitting $6.3 trillion between 2007 and 2061. Giving the USA notes that total charitable giving in the US hit approximately $304 billion in 2009. Wealth Management reports that on average the Forbes 400 gives around 8% to 11% of their income to charity annually, and 15% to 20% of their estates. The Giving Pledge is clearly serious amping up those percentages too. Surveys show that more wealthy individuals are choosing not to spoil their heirs with large inheritances, and are adopting the “my last check before I die should bounce,” mantra.
The Billionaire Census report from UBS and Wealth-X estimates the world’s billionaire community of just over 2,000 individuals is worth around $6.5 trillion. The data shows that the average billionaire owns 4 homes, with an estimated total value of $80 million. That is likely in addition to any other real estate investments.
The Million Dollar Donors report suggests that universities continue to be among the top recipients of philanthropic gifts. That may be changing as education trends change, and wealthy philanthropists find new, more impactful ways to give. Forbes has suggested that “governments can’t erase poverty. Nor can big corporations.” Instead, hope is being placed in entrepreneurs and individual donors. Some call this social entrepreneurship, others dub it ‘philanthrocapitalism’.
10 Ways to Leverage Real Estate Assets for Good
There’s more than one way to give from a real estate portfolio…1. Trusts
Trusts are a common vehicle for wealth preservation, succession planning, and giving, amongst the affluent. They can be used to invest in real estate, to hold assets, to provide easy transfer of assets to the next generation in a controlled manner, and to ensure ongoing legacy giving for generations.
2. Donating Property
With the current high point in US property values, this is a highly attractive time to give real estate and maximize tax deductions. The ‘godfathers’ of modern philanthropy often found this best done in partnership with local organizations who were willing to invest in some way as well; i.e. donating property for public libraries. Those attempting to give real estate as an in-kind donation may find it harder than anticipated. Some charities just don’t get it.
3. Liquidate and Give the Proceeds
Executed well, the property can be liquidated, and some or all of the proceeds can simply be given to a favorite cause as a cash donation. This may work well for supporting nonprofits like charity: water who puts 100% of donations to work in the field, but who has turned down real estate gifts in the past.
4. Sell Property to Nonprofits at a Discount
One of the lesser-known ways to both gift property and earn tax credits is to sell the property to qualifying nonprofits at a discount. The ‘loss’ can then often be rolled over for several years to counter any tax liability on other income or investment gains.
5. Gift Real Estate with Retained Use
Some individuals want to ensure they give the most to charitable causes as they can while they are still alive, but may not always be finished using the property; as with a personal residence or second home. In these cases, owners can gift the real estate now, and retain a life estate so that they may use the property for the duration of their lives. Provisions can be included for life estates to cover spouses, children, and other loved ones as well.
6. Gift Use, Retain Ownership
Reversing the previous scenario some property owners have no use for assets but are not sure they want to completely give up the family wealth yet either. Usage can be donated or provided under a long-term lease, i.e. 99-year leases for multi-generational assets.
7. Gift Income from Real Estate
Families who don’t need the income yields being thrown off from their real estate assets can dedicate these streams to charity for consistent monthly, quarterly, and annual giving pledges while retaining ownership of the asset itself. It’s a way to help immediately with surplus cash while preserving family wealth.
8. Gift Real Estate with Retained Income
Those who need the passive income produced by real estate investments, but who do not have heirs to leave property to may consider giving the property now while retaining any cash flow for the duration of their lives.
9. Property Rights
In addition to traditional usage real estate may have a variety of other valuable rights and assets. This may include timber rights, air rights, and oil, gas, and mineral rights. These can all be divided up. In some case the land and structures may be the most beneficial to a charity, while another for-profit organization may be able to best maximize the value of other rights.
10. Start a Foundation
Like Bill and Melinda Gates, private foundations are a common vehicle for the wealthy to fuel philanthropic goals. Through this foundation property may be given or leased for community projects, or real estate may be deeded to the foundation for use as office headquarters.
How will you do it?