How to Gift Real Estate to a Donor-Advised Fund

A client has owned a rental property for 20 years. It’s paid off, it’s worth far more than they paid, and they’re ready to let it go. They also give steadily to a handful of charities and want that support to continue for the next decade, not end in one large check.

Knowing how to gift real estate to a donor-advised fund lets you help this client take a deduction for the property now and keep supporting their charities for years after it sells. The plan depends on the order of events: the property has to qualify, the gift must happen before any sale is signed, and the sponsor (not the client) must sell the property.

Can You Donate Real Estate to a Donor-Advised Fund?

Yes, you can donate real estate to a donor-advised fund (DAF) when the property meets the sponsor’s acceptance conditions. Before donating real estate to charity, confirm these three conditions: there’s no mortgage or other debt, the property can be readily sold, and no sale agreement has been signed. Real estate held more than a year is generally deductible at fair market value. The deduction is capped at 30% of adjusted gross income (AGI) each year. Any excess carries forward for up to five years. The client also avoids the capital gains tax a direct sale would trigger.

How Do You Gift Real Estate to a DAF? 5 Steps

As an advisor, your part is heaviest at the start. Once the gift is accepted, the DAF sponsor carries most of the work.

1. Contact the DAF sponsor before the property is listed. If the client signs a purchase agreement before the gift, the IRS can treat it as the client’s own sale and tax them on the gain. Once the client starts talking to brokers, it’s time to reach out.
2. Gather the property details. Having details ready can speed up the review the sponsor must do before accepting the property.
3. Walk the client through the gift agreement. The sponsor reviews the property against its acceptance conditions. If it accepts the gift, the client gets a gift agreement to sign and may want their attorney to review it first.
4. Line up a qualified appraisal. The tax deduction is based on the qualified appraisal, not the asking price or the tax assessment. The appraisal can be done no more than 60 days before the gift, and the client’s CPA will need it before filing that year’s return.
5. Coordinate the deed transfer. The client deeds the property to the sponsor, the DAF account opens, and the sponsor sells the property. The deduction generally counts for the tax year the deed transfers.

When Can the Client Start Recommending Grants?

Grants funded by the property generally wait for the sale. Until then, the sponsor holds a building rather than cash. How long the sale takes depends on the property and the market, so the client shouldn’t specify the date a grant will arrive.

If a charity counts on the client’s annual gift, that client can contribute cash to the account alongside the property and grant from that while the sale is pending.

Once the property sells, nothing forces the money out quickly. DAFs have no annual payout requirement, so the client can grant a steady amount each year for a decade or more. With an advisor-managed DAF, you keep investing the proceeds according to the strategy you and the client set, so whatever hasn’t been granted stays invested.

What Should Advisors Tell Clients Before Gifting Real Estate to a DAF?

Raise these three points early with clients, since each one can change how the gift is planned:

• The deduction is set when the property is gifted. It’s based on the appraised value when the deed transfers. A higher or lower sale price later doesn’t change it.
• A large gift may take several returns to deduct. On a high-value property, the annual AGI limit can push part of the deduction into later years. Bring the CPA in early to plan for it.
• A mortgage or tenants change the plan. Debt must be cleared before the gift, and tenants add steps.

Questions Advisors Ask About Real Estate Gifts to a DAF

A few questions tend to follow once a client is serious about gifting a property.

What about donating real estate to a private foundation?

It’s possible, but the deduction for appreciated real estate given to a private foundation is generally limited to cost basis rather than fair market value. On a rental bought decades ago, that can shrink the deduction to a fraction of what the property is worth. For clients weighing a donor-advised fund vs. private foundation, that difference often settles the question.

Can the client choose the buyer or set the price?

No. Once the deed transfers, the DAF sponsor owns the property and controls the sale. If the client already has a buyer in mind, raise it with the sponsor before the gift, not after.

Planning a Real Estate Gift? Start Before the Property Is Listed

Timing shapes most of what’s possible with a real estate gift, and the best time to call is before a broker or buyer is involved. Tell us about the property and what the client wants their giving to look like over the next decade, and we’ll help you plan the gift, the sale, and the grants.

This content is for educational and marketing purposes only and is not tax, legal, or financial advice. Tax outcomes depend on individual circumstances and current law. Invested assets may rise or fall in value, and growth is not guaranteed. Falls in value of the invested assets, if any, are not insured against loss. Investment options and asset acceptance are determined solely by Renaissance Charitable Foundation, Inc., its affiliates, agents, successors and assigns (collectively “RCF” or “Renaissance Charitable”). Please consult your own tax, legal, and financial advisors before making charitable, legal, or financial decisions.