Trusts and Estates

Ca. Trs. & Estates Quarterly Volume 13, Issue 1, Spring 2007


By Chris Nicholson, Esq.*, Bruce H. Coblentz, CPA**, and Edward Faircloth, CPA***

Recently, significant attention has been focused on the Pension Protection Act of 2006,1 which enables individuals age 70 ½ and older to make distributions of up to $100,000 exempt from federal income tax from their Individual Retirement Accounts (IRAs) to public charities in 2006 and 2007. Although Americans hold approximately $3.5 trillion in IRAs, that amount pales in comparison to the amount of wealth held in the form of real property.2 Recent studies suggest that 50 percent of American wealth is held in the form of real property.3 Further, it is estimated that real property will constitute 40 percent of the $12 to $15 trillion which is expected to be transferred by 2025.4 However, real property accounted for less than 2 percent of the $248.52 billion contributed to charity in 2004, according to a report by Giving USA.5

Real property riches are especially abundant in California. With a median home price of $567,360 and approximately seven million single-family homes, the Golden State alone has real property assets of $3.9 trillion, and this does not include multi-family homes, commercial property and raw land, all forms of real property and therefore all potentially suitable for charitable giving.6

This article outlines both the process and the charitable tools which can be used to transfer real property to charitable organizations, ranging from an outright gift, bargain sale and retained life estate to split-interest strategies involving trusts and gift annuities. The article focuses on the impact real property gifts have on charities, highlighting the challenges charities face when considering these gifts and outlining the steps charities take in the review and approval process. Examining the gifting process from the charity’s perspective will provide advisors with new insights into gifts of this nature.

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