Donating To HOAs
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DONATING TO HOAs

QUESTION: Is it possible to set up a mechanism by which older homeowners could leave their assets to their association when they pass? I have friends who are well off but have no family to leave their money to.

ANSWER: Yes, both the living and the dead can transfer assets to their associations--one more easily than the other.

Estate Planning. An association's ability to receive donations of cash and property is sometimes found in their governing documents. Even if not explicitly spelled out, they still have that authority as corporations. That means they can receive cash and property via someone's will. As part of their estate planning, owners can simply name their HOA as a beneficiary in their will or trust. When they pass, their assets transfer to the association. The transfer would be taxable since homeowner associations are not 501(c)(3) charitable organizations.

Charitable Organizations. Homeowners can also make transfers while they are living. The transfer would, however be subject to taxation. Even though homeowner associations are nonprofit, they are not tax deductible organizations. If an association wants to make the gifts tax deductible, they could set up a separate tax exempt Community Service Organization (CSO) with its own board of directors.

Limitations. The independent CSO could then oversee fund-raising and charitable services. A significant limitation is that the recipient association cannot receive a direct benefit from the CSO--the funds raised cannot be used for maintenance of the common areas or to supplement their reserves. . To ensure compliance with the laws governing charitable organizations, the CSA must register with the Attorney General's Registry of Charitable Trusts which oversees them. In addition, it must annually file tax returns with the IRS and the Franchise Tax Board showing that its funds are being used for charitable purposes.

Charitable Services. For a senior community, charitable services might include transporting seniors to their doctors, changing the batteries in smoke alarms in their homes, or holding educational classes.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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