A Q&A on Planned Giving and Donating Real Estate

Terry Brown is Senior Executive Director of Planned Giving at the University of Pittsburgh. Terry has been helping individuals and families make important planned giving decisions for 30 years at several nonprofit organizations in Pittsburgh. He took time to answer a few questions about his area of expertise.

Q: What is planned giving?

A: Simply put, a planned gift is a substantial gift made to a charity during a person’s lifetime or at their death in a manner that allows the donor to give more than they could only using their annual income. Planned giving includes a variety of methods to give to a charity that can benefit you and your heirs as well as the University. Depending on the method it could come with income tax benefits, life income for you or a loved one, and reduced or eliminated estate or gift tax. Often planned giving is seen as something that happens after your death but that is not the entire picture.

Q: Are there ways you can make such a gift other than simply adding a bequest to Pitt to a will?

A: Yes, very much so. In addition to bequests, the most common way people make a planned gift is through a charitable gift annuity. In this case, the University and the donor agree that the University will pay a fixed amount of income to the donor and/or another beneficiary for life, and it’s backed by all the assets of the University. Other ways of giving include a charitable remainder trust, a charitable lead trust, and in some cases gifts, tangible personal property such as of real estate, art, or other collectibles. 

Q: You mentioned real estate. What types of real estate?

A: There are four basic types; commercial property including rental units, undeveloped property, your current residence and other homes you might own, and farm land.

Q: Why give the property directly to Pitt rather than selling it and giving cash to the University?

A: First of all, it eliminates the headaches associated with selling a property, but the best reason is for tax purposes. If you were to sell a piece of property that had increased in value since you purchased it, you would be liable for capital gains tax on the sale. But if it is donated to Pitt you won’t owe the tax. Donating the property could also prevent you from moving up to another tax bracket or being subject to other income-related changes.

Q: What if someone is getting income from a rental property, how can they replace that income but still take advantage of not having the asset taxed when it is passed to their children or heirs?

A: You can designate it as a charitable gift annuity. The sale price of the property, less any costs, would be placed in the annuity and the University of Pittsburgh would give you, and/or anyone you designate, an income for life based on your age and the amount of the annuity. For someone in their 70’s that could be as high as 6.5% of the initial value of the annuity. We can do that calculation for an individual using their exact age and the amount expected to be realized from the sale.

Q: Are there another type of asset that are often used to make a planned gift?

A: We see a lot of appreciated stock. In this instance, you don’t avoid the capital gains but you defer it to a time when you have less earned income and are in a lower tax bracket. The income you receive each year is partially taxed as capital gains but often at a much lower rate. Again, we can do the calculations based on an actual scenario so the potential donor knows just how they will benefit.

Q: Why not just put the stock into a trust that a lawyer creates for the family?

A: The value of a trust can fluctuate along with the markets, but a gift annuity is an agreement between the donor and the University and it’s backed by the full faith and credit of the University of Pittsburgh, meaning that we guarantee payments to the donor. I know of no instance where a legitimate 501 c3 charity has ever defaulted on a gift annuity.

Q: When should I start thinking about planned giving?

A: It’s never too soon. Depending on your age and your goals, some options might be better than others and some might not be available to you at all, but there is always something. There are many ways to give without impacting your current cash flow, lifestyle or family security.

Q: Should I call you or my financial planner first?

A: Since there is no obligation and you are just fact finding, it probably is a good idea to talk to us and get some information that you can then take back to your lawyer or financial advisor. You will eliminate a step. Otherwise you will go see them, come to us, and then have to go back to them anyway.

Q: So, how do I start?

A: You can contact the University’s Office of Planned Giving at 888-353-9604 and I, or another planned giving expert on staff, will help you identify what assets might best be used for a planned gift; what your overall philanthropic goals are; and what vehicle would best fit your tax and income needs. 

Terry BrownTerry Brown
Senior Executive Director, Planned Giving
Office of Institutional Advancement
Walter.Brown@ia.pitt.edu
(412) 648-3185
(888) 353-9604