LOOKING TO DONATE LAND TO A NONPROFIT? FOLLOW THESE 5 STEPS
By Randy Kaufman
with research assistance from Dustin Lowman
The view from my Columbia County home.
In the early sixties, my parents decided that their Brooklyn children should have a life that included the country. My frugal dad, who never believed in mortgages, saved enough to buy a small house in Columbia County for summer weekends replete with frog catching, hiking and mandatory Tanglewood concerts. The house was — and still is — ensconced in nature; wind and sunlight filters through the windows, forest extends for miles all around, and just over the western hill, 150 acres of farmland spreads out like a postcard tableau.
The farmland was run by a woman named Nat. Her skin was bronzed and lined by days in the sun, she wore her hair in a red bandana, and she was always clad in blue denim overalls.
In Spring 2001, Nat passed away.
The question arose: What would happen to the farmland?
I had a Memorial Day picnic with a few neighbors who felt as strongly as my family did about the land. None of us could afford to buy and maintain the land alone, but we wanted to see it preserved (and there were some favorable tax incentives if we donated it, too). So, over hotdogs and beer, we decided to buy the land together and donate it to the local Land Trust, who would surely need it and be able to manage it.
When I called the land trust and explained the plan, they more or less replied, “What are you talking about, young lady?”
They wanted to know things that we had never considered. How was the land zoned? How many houses were on the land? Were there any existing easements? Had we surveyed the land yet to understand the different plots (and would we be willing/able to pay for these surveys? How rickety was the farmhouse, and did we expect them to maintain it?
They rejected our offer. I was dumbfounded.
This was 150 acres of beautiful farmland. Why would they say no to this generous gift?
Maintaining a farm that size costs millions. Where were those millions going to come from?
For starters, they told me, the land had nothing to do with their goals, was beyond the scope of their resources, and wasn’t in an area accessible enough to the general population. Once they walked me through their reasoning, I felt foolish for seeing only our objectives and not considering their side of the story.
Later, an organic farmer bought the land and converted it into an organic farm. She has invested a vast sum in farmhouse renovations alone, and much more in turning the property into an organic farm, including renovating a number of beautiful old barns. To make ends meet, she hosts concerts and yoga classes. Her work is never-ending; she’s constantly spending money to redo the other buildings, keep the heritage livestock she cherishes, and manage the farm. The land is being put to good use — at considerable expense.
Would a nonprofit land trust have been able to invest millions in ongoing maintenance? Especially for land that didn’t border land they already had? Likely not.
As I have often said, giving well isn’t easy. It involves both the head and the heart. Good intentions are a start, but careful analysis and consideration are what separate impactful giving from ego-driven giving. In this article, Lori Ensinger, President of the Westchester Land Trust, and I discuss what it means to give well, and the steps you should expect to follow when giving a substantial gift.
5 STEPS TO FOLLOW WHEN YOU PLAN ON GIVING A GIFT:
1. Reach out to the organization FIRST.
Lori: Having been on the other side of Randy’s story numerous times, I can confirm that before individuals/groups start planning the particulars of a gift, the first thing they should do is reach out to their target organization. When donors don’t reach out first, we’re much more likely to run into deal-breaking obstacles, such as:
When you donate property to a land trust for it to be conserved, it loses its development value — which is typically most of its monetary value. Unless specifically permitted by the donor, we can never resell property for development once it’s ours. Many donors assume they’re giving us a great fiscal asset. The land may be a great asset from an ecological perspective, but for a land trust, it’s a significant and costly obligation. Land trusts are in the business of “perpetuity,” a daunting responsibility that we are prepared to take on, but only if prudently funded.
Many land trusts will not accept donations of land with structures on them. The Westchester Land Trust has a staff of only ten — not nearly enough to maintain a building full-time. Sometimes, there are ways to work around this, but only if you reach out before making the gift.
Most acceptable land donations require endowments. Endowments are a commonly accepted part of other charitable gifts, notably academic scholarships. Because the land we accept for conservation will lose most of its monetary value once we conserve it, and because it takes a good deal of money for us to steward the land in perpetuity, we require that endowments accompany land donations. We are always grateful for a gift, but practically speaking, we need to be sure we can meet the donor’s expectations to care for it forever!
Philanthropically or not, the best gifts are those that the recipient needs and can use. Reaching out to your target organization is the only way to tailor your gift accordingly. Whatever type of gift you’re thinking of giving — land to a land trust, a scholarship to your alma mater, computers to an underfunded school — it always makes sense to reach out first to see if your intentions align with their needs.
2. Achieve a mutual understanding of each other’s goals.
Lori: In Randy’s story, she and her neighbors started with a good understanding of their own goals: Preserve the land they loved, and reap some favorable tax benefits. What they didn’t have was a solid understanding of their target organization’s goals.
When people hear the word “nonprofit,” what they often hear is “non-business.” Nonprofits have all the same business burdens that for-profit organizations do, and as such need to consider whether a gift is pragmatic — regardless of how beautiful/valuable it might otherwise be. In addition to providing funds for the organization to maintain the gift, it also helps to calibrate your gift to the organization’s specific function (more on that in a moment).
3. Adapt your gift based on the nonprofit’s restrictions.
A lush pond at Westchester Land Trust’s Mill River Preserve, Lewisboro, NY
Lori: As referenced above, people often come to us hoping to donate land with a home built on it. Unfortunately, we typically can’t accept land donations that way, but there are some common modifications that allow us to accept the donation and find a good next chapter for the structure:
Subdivide the land to exclude the home. If the land is 75 acres with a house in one corner, the donor might be able to first subdivide the land to exclude the 5 acres or so on which the house is situated. The donor can sell the 5-acre parcel with the home, and we can then accept and preserve the other 70 acres of undeveloped land.
Find another organization to use the house as their headquarters. Many nonprofits are looking for homes to use as their headquarters; with a little research, we’ve been able to reconfigure a land donation such that both the Westchester Land Trust and another organization benefit from it.
Point being: Nonprofit organizations face restrictions that might make the first iteration of your gift impossible. Expect to expend a little effort reconfiguring the gift to suit your goals and the organization’s goals and restrictions.
4. Aim to give gifts related to the nonprofit’s key function.
The best individual gifts are tailored to your friends’ and loved ones’ interests and hobbies. If one friend is a painter and the other is a sailor, it’s obvious who should get an easel vs. a collection of nautical charts.
Sunrise at Westchester Land Trust’s Otter Creek Preserve, Mamaroneck, NY
The same principle applies to nonprofits. Aim to give gifts most closely aligned with the organizations’ central function. Giving a Lamborghini to an art museum might seem like you’re giving them a valuable asset they liquidate and transform into a new Renoir, but this isn’t always the case. Certain “related use rules” prohibit the favorable tax treatment nonprofits (and you) get from gifts of art and collectibles. Always consult your tax attorney or another tax professional before giving philanthropic gifts.
5. Get some expert help.
Your goal as a philanthropic giver is to make your gifts as impactful as possible. You want the gratifying feeling of furthering a cause you care about, and you want the financial benefits that come with it.
Because of that, you should always consult professionals who know both you and the regulations surrounding philanthropic gifts. Wealth advisors, philanthropic advisors, and tax attorneys provide a valuable bridge between people who want to give organizations who need resources. They not only help you tailor your gifts in the most impactful ways to you and your target organization, but they help you avoid common pitfalls you might otherwise encounter along the way.
However you plan to give — even if you’re giving cash — plan to involve the nonprofit early and often. The best philanthropic engagements are partnerships, where each side understands the other’s needs and limitations.
ABOUT THE AUTHOR
Randy Kaufman, formerly a corporate tax attorney and investment banker, is now a wealth advisor who prides herself on focusing on what matters most: clients’ peace of mind, family dynamics, and getting enough, not more. Randy is a passionate student of impact investing, strategic philanthropy, and behavioral psychology (while not a psychologist, she occasionally plays one in the boardroom). She is dedicated to helping the underprivileged, and is a proud member of global venture fund Acumen's advisory board. A thinker, learner, and pursuer of overarching truths, she is always eager to discuss big ideas about money, and its off-and-on associate, happiness.