Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity. Today’s question comes from a nonprofit employee who wants advice on how to accept a real estate gift for the first time:
Dear Charity Clairity,
We have a board member who wants to donate a gift of real estate. My boss wants me to “make it happen.” We’ve never done this before. I’m worried about getting in over my head and exposing the charity to risk. Help!
— Want to Say No
Dear Want to Say No,
There are two principles at play here, and you’re wise to recognize them:
- The value of being donor-centric, and
- The value of conducting due diligence to protect your charity and the donor.
Your boss is concerned with making your board member happy. This is laudable, and I would never suggest saying “no” to a board member or other donor without exploring your options. Gifts of real estate can be a definite win/win, with your charity reaping financial rewards and the donor accomplishing personal, financial, and tax-planning objectives.
Whether or not this is a gift you can “make happen” depends on a number of variables. Since this is a “hot” prospect, my best advice is to seek out someone experienced to help you with this particular gift. It’s well worth developing a relationship with an expert you can call on, especially for complex gifts that require some finesse. The amount you pay will still be much less than the amount you’ll receive. So “we can’t afford this” is nonsensical. Options include:
- Find a local attorney experienced in nonprofit charitable gift planning. If you have a local law firm that specializes in nonprofit law, this is a place to start. If not, contact estate planning and real estate firms to see if they handle this type of transaction.
- Find a national attorney experienced in nonprofit charitable gift planning. If you can’t find someone local, there are a range of law firms with this specialty. Search the internet or get recommendations from other charities you respect. If these practitioners are not able to help you directly, they may be able to recommend someone who will. Maybe even someone local about who you were unaware!
- Find a local community foundation willing to take on the work for a small fee. If you are faith-based, this is something your local Jewish Community Federation or Archdiocese may be willing to help with as well.
- Find a donor advised fund manager that accepts real estate gifts (most of the big ones, e.g., National Philanthropic Trust, Schwab, Vanguard, Fidelity, do). Then suggest to the donor they may want to set up a DAF and recommend all or a portion of the real estate’s appraised fair market value on the contribution date be directed to your charity.
Moving forward, here are some steps to take to put in place a plan – with guidelines – to accept non-cash gifts.
- Develop a gift acceptance policy. One of the best templates out there is one developed by Kathleen Miree. Borrow it, adapt it for your organization, and run it by the appropriate board committee and/or subcommittee(s) (e.g., Finance, Investment, Development, Endowment). Once approved, the guidelines should be forwarded to the full board to vote on their acceptance. Such a policy is a godsend for staff because you can now say “I’m sorry, our policy prohibits us from accepting gifts of property sitting on toxic waste sites.” Or “I’m sorry, our policy prohibits us from accepting gifts of encumbered property.”
- Put together an expert advisory committee. Include professionals who specialize in charitable gift planning, law, accounting, and real estate. Besides giving you individuals to call on for complex gifts, you can also run the question of whether to move forward with any particular transaction by your entire committee – removing the onus of responsibility from just you or your boss.
I once had a boss exactly like yours, and together we wanted to ultimately become the most welcoming place on the planet when it came to accepting non-cash assets. I also knew I needed help. So, I began by talking to some of my local fundraising colleagues experienced with planned giving. I started with someone who worked at a nearby university, where they happened to have a complete real estate division. I learned all about environmental impact reports, title insurance, carrying costs, and more, and was able to report back to my boss so we all knew what was involved. Simultaneously, I hired a nonprofit attorney to help guide me through the gift acceptance process.
We definitely said no to some gifts, like the abandoned gas station sitting on a toxic waste lot. But we also said yes!
Once you’ve got your team together, you’ll find the process pretty straightforward. It’s definitely a lot of work, but the rewards justify the investment.
Maybe a decade hence you’ll be happy to say “Yes, let’s look into this! We do this all the time.”
— Charity Clairity
Please use a pseudonym, like “Want to Say No” did, if you prefer to be anonymous.