JUNE 2024 | 31 THE OKLAHOMA BAR JOURNAL Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff. HALF A LOAF IS BETTER THAN NONE14 While Frank Sinatra might have famously crooned that he wants it “all or nothing at all,” this is simply not true for most nonprofits.15 There are several ways a donor can gift real property without entirely relinquishing the benefits of their investment. The following options outline an array of giving solutions that may serve a client wishing to retain an income, access or ownership interest. Whole-y Cow! Fractions are Fun16 Clients may elect to donate a fractional interest in the property in lieu of the whole ownership interest. To qualify for a charitable contribution deduction, it must be a gift of an undivided interest in the donor’s entire interest in the property.17 This can be done simply by deeding the fractional interest to the charitable organization. If the transfer is intended to occur at death, the attorney should draft accordingly in the estate plan or otherwise in a transfer on death (TOD) deed. Typically, charitable organizations favor providing preferred gift language. This practice may be done anonymously and generally proves helpful to the client, the attorney and the charitable beneficiary. Let’s Make a Deal! Bargain Sale Benefits Bargain sales benefit donors wishing to receive compensation for a portion of the sale price. In these instances, the donor sells the property to a charitable organization at a discount. For example, the donor conveys the property to the charitable organization for a portion of the fair market value (FMV). The seller then receives a charitable income tax deduction for the amount that was discounted below FMV.18 Charitable Trusts: ‘Tis Better to Give AND Receive Donors may also let the charitable organization “borrow” the property benefits for either a term of years or for the donor’s lifetime by creating a charitable lead trust (CLT). With CLTs, the property will either revert to the donor’s heirs at the donor’s passing or back to the living donor (or other specified recipient) at the end of a stated term of years.19 Conversely, with a charitable remainder trust (CRT), the donors may desire to make a gift and retain the right to receive payments (for themselves or up to eight of their loved ones) during either their lifetimes or for a specified term not exceeding 20 years.20 At the expiration of the term or the death of the donor(s), the remainder interest benefits the charitable organization. Testamentary CRTs provide a posthumously funded option to provide income to the client’s loved ones and ultimately fund a charitable purpose. Contributions to a CLT or a CRT will receive a charitable contribution deduction for the actuarial value of the interest passing to charity.21 ‘Til Death Do Us Part: Retained Life Estates Are Great! Retained life estates allow the donor to receive an immediate tax deduction while retaining the use and enjoyment of the property during their lifetime. A common example is an elderly client who wishes to live out their days in their own home but is charitably inclined. At the death of the surviving spouse, the charitable organization will have the right to occupy or liquidate the property. This option is available for residential property and farms. The attorney should draft a formal gift agreement outlining who is responsible for property costs incurred during the donor’s lifetime and other important details.22 STOP, COLLABORATE AND LISTEN!23 Attorneys ought to remember the wit and wisdom of Will Rogers when he remarked, “Everyone is ignorant, only on different subjects.”24 Relying on the proficiencies of various professionals is often essential to reaching the best result for your client.25 Oftentimes, a task force contributes their respective expertise throughout the process due to the nature and complexity of this gift type. The typical cast of characters includes the client, the client’s attorney, a qualified appraiser, a property inspector, the client’s financial advisor, the client’s accountant or tax advisor or a representative from the beneficiary charitable organization. Confidentiality and Conflicts As always, honoring client confidentiality remains a core component of our code of ethics as attorneys.26 The attorney should, in many cases, request a client’s permission in the form of written informed consent before discussing the client’s affairs with other parties.27 As a practical matter, with so many moving parts and parties in these transactions, it is helpful to have clear lines of communication in place to ensure priorities are understood, deadlines are agreed upon and the expectations of all parties align. Occasionally, clients fall under the mistaken assumption or
RkJQdWJsaXNoZXIy OTk3MQ==