Integrate Charitable Planning into Your Estate Plan
As we settle into this vibrant fall season, it is the perfect moment to shine a spotlight on a powerful strategy for protecting both your legacy and the causes you care about: integrating charitable planning into your estate plan. Whether you are crafting your will, establishing trust, or creating an enduring philanthropic pathway, thoughtful charitable planning amplifies impact and demands clarity around asset valuation.
That’s why we’re thrilled to introduce David Ziccardi of Valiant Appraisal Services, a Pennsylvania- and New Jersey-certified residential appraiser who brings more than just numbers to the table. As the founder and owner, David anchors his practice in integrity, transparency, and strategic insight, ensuring that every valuation is actionable and meaningful.
As you explore how to weave charitable giving into your estate design, you will see professional valuation, especially of real estate, serves as the backbone for compliance, strategic gifting, and maximum tax effectiveness. Let us learn how partnering with someone like David can transform planning from guesswork into a purpose-driven strategy.
Why Valuation Matters in Charitable Giving
When charitable giving involves real estate, an appraisal of the asset(s) provides assurance that the value reported to the IRS will be market-supported and respected.
One of the most common points of confusion in charitable giving is the concept of Market Value. Market value is the price a property would bring if exposed to the open market, with both buyer and seller acting prudently and without pressure. This is the figure that needs to be reported to the IRS to substantiate a charitable deduction, and it is typically best supported by a qualified appraisal.
Many people assume that a sale price or tax assessed value automatically represents market value, but that is not always true. A property might sell for less than its true market value if the owner accepts an expedited, below-market offer from a family member or friend. On the other hand, an owner might rely on an inflated number from a tax assessment, neither of which may reflect what typical buyers are paying. In both cases, only a defensible appraisal bridges the gap, ensuring the value reported for deduction purposes is accurate, objective, and able to withstand review.
An appraisal ensures donors are not relying on poorly supported estimates or tax assessment figures, which may not hold up under review. Instead, donors have a clear, defensible connection between what the property would bring in the marketplace and what is reported for deduction purposes.
Legal Mechanisms for Charitable Planning
What is a charitable remainder trust, and how does it work? In a charitable remainder trust: A donor transfers property, cash, or other assets into an irrevocable trust. The trust’s basis in the transferred assets is carryover basis, which is the same basis that it would be in the hands of the donor, for assets transferred to the trust during the lifetime of the donor. The trust pays income to at least one living beneficiary. The payments continue for a specific term of up to 20 years or the life of one or more beneficiaries. At the end of the payment term, the remainder of the trust passes to one or more qualified U.S. charitable organizations. The remainder donated to charity must be at least 10% of the initial net reasonable value of all property placed in the trust. Charitable remainder trusts are irrevocable. Assets that go in cannot be taken back.
Real Estate Gifting: Appraisal + Legal Guidelines
The IRS has requirements for non-cash charitable contributions, including real estate. In most cases, a qualified appraisal from a qualified appraiser is needed. While the forms and thresholds are handled by tax professionals, the appraiser’s role is to provide the defensible support that makes those filings possible.
A qualified appraisal is an appraisal report prepared by a qualified appraiser that follows the Uniform Standards of Professional Appraisal Practice (USPAP), meets specific IRS requirements, and includes detailed information about the property being gifted. The appraiser must also make certain declarations within the report, and importantly, the appraisal fee cannot be tied to the property’s value.
A qualified appraiser is someone with verifiable education and experience in valuing the type of property being appraised. IRS rules state that, as of the date the appraisal is signed, the appraiser must either have completed relevant professional or college-level coursework with at least two years of experience appraising that type of property or hold a recognized appraisal designation.
There are also individuals who are specifically not considered to be qualified appraisers. These include the donor of the property; parties connected to the transaction by which the donor acquired the property; the done; certain related parties or employees of those involved; and anyone who’s prohibited from practicing before the IRS at any time in the three years preceding the appraisal. Also, appraisers whose fees are based on the value of the property being appraised are disqualified.
Timing is equally important. A qualified appraisal must be signed and dated no earlier than 60 days before the date of the charitable contribution and no later than the tax return deadline on which the deduction is first claimed (including extensions). Ordering an appraisal too early or too late can create unnecessary compliance issues and delay the gifting process.
By engaging an appraiser who understands USPAP standards, IRS requirements, and timing considerations factors into the process, donors and their advisors can proceed with confidence that the reported value of a real estate gift will be defensible and respected.
When it comes to legal guidelines, the property is not sold to the trust. It is gifted through a deed change. The original owners of the property can serve as trustees of their Charitable Trust if they wish. However, once the trust is designed and signed, they cannot make changes, such as the amount of annual income they want to receive from the trust. Each year, they must receive at least 5% of the trust’s value as of January 1st. They need to be careful and not make too much money each year, since at the end, there needs to be at least 10% of the initial reasonable value of the trust remaining. When choosing the charity or charities that will eventually benefit from their trust, it may be wise to name alternatives in case the original charity no longer exists or is merged with another charity.
End of Part 1
