Gary and the Black Hole in Charity Land
For the past few weeks, we’ve been reviewing the nine potential ways that you can give to charitable organizations. So far, we’ve reviewed stocks, registered retirement investments, and small business shares. This week, we’re diving into real estate with a unique donor named Gary.
Gary’s Story: Donating Real Estate to Charity
Gary wasn’t your average donor. He said two things that reveal who he is and how he thinks. “Land — they’re not making more of it!” and “I don’t want to pay taxes when I die.”
These two sentiments aren’t often heard together in a donor discussion, but as a retired contractor who had invested in land development over the years, Gary focused on people, places and things. He was a widower with one adult child, and he was a hard-working individual who could always be counted on to financially support his favourite organizations.
For instance, one of Gary’s charities once received a $1 million challenge grant. Without hesitation, he pledged $100,000. His philanthropic giving was always done quietly and without recognition. When he saw the community’s donations were at $850,000, Gary called to kick in that last $150,000. Of course, everyone wanted to know, “Who was the final donor?” The response was “Anonymous.”
But Gary wasn’t done with his giving. As he described, he had large tax obligations due to his large amount of taxable capital gains. His accountant alerted him to update his will and told him to plan to allocate his assets and look at which organizations might help him reduce his taxes.
At FUNDING matters, we’re familiar with how this can be done thanks to the Power Donor Experience and the GIFTABULATOR. If you’re in a similar situation to Gary, make sure you check out our resources to minimize your taxes.
The Black Hole of Charitable Giving
Gary would often say that he felt that he was putting his money into a “black hole” when donating to charities. He never knew where the money went or how it was spent. No one in his family shared his spirit of community support or charitable giving either.
However, thanks to his accountant’s advice, Gary knew that charitable giving could help him out of his dilemma of paying taxes when he died. To get this process started, Gary approached a charitable organization about establishing a foundation. When Gary passed, the organization would receive a donation from Gary.
The process ended up working out well for him. The foundation was established, the board was nominated and elected, the Investment Policy Statement (IPS) was created, and information about the new foundation was slowly shared. The IPS was based primarily on stocks, mutual funds, and cash donations from estates.
While Gary was alive, he had a $3 million property that he acquired many years ago. With real estate values at an all-time high, this would have been an ideal time to sell; however, it also would have meant immense capital gains tax. Fortunately, he also had the option to donate the property.
The property was donated, and the charity’s foundation received the largest donation in its history. Gary requested that the organization retained the property until he passed since it could be used as a wonderful retreat for community members. It could even generate new revenue for the charity!
Gary has since passed, but he gave direction in his estate for another major asset to be given to the foundation he created. In the next blog, we’ll cover Gary’s estate bequest.