The Gift You Haven’t Considered: Why Non-Cash Giving Deserves a Place in Your Year-End Plan

As the calendar moves into October, many of us begin thinking about year-end charitable giving. We may have a list of organizations we want to support, a charitable budget in mind or simply a desire to give back before the end of the year.

After more than 10 years of working at Greenleaf Trust with individuals and families as they think through their charitable giving, and with more than 30 nonprofit organization clients, I’ve had the opportunity to see this from both sides. I see how individuals consider their charitable gifts, and I see how nonprofits put those gifts to work in their communities.

That experience is one reason I wanted to revisit a giving strategy that is sometimes overlooked: giving an appreciated asset instead of cash.

If you own investments that have increased significantly in value, a non-cash charitable gift may allow you to accomplish two things at once. You can support an organization you value while potentially receiving an income tax benefit and avoiding capital gains tax that might otherwise result from selling the asset.

The key is to plan ahead. As the end of the year approaches, there may be less time to identify the right asset, coordinate a transfer and complete the necessary documentation.

Look Beyond the Checking Account

Cash is simple. But it may not always be the most tax-effective asset to give.

Imagine you purchased shares of stock years ago for $10,000 and those shares are now worth $30,000. If you sell the stock, the $20,000 gain may be subject to capital gains tax, depending on your circumstances.

Instead, if you give the appreciated stock directly to a qualified charitable organization, you may be able to claim a charitable deduction based on the fair market value of the donated asset. At the same time, you may avoid recognizing the capital gain that would have resulted from selling the investment.

That can make appreciated securities an attractive charitable-giving asset.

Of course, tax rules depend on your personal circumstances, the type of property you are giving and the organization receiving it. But the basic planning question is worth asking: Before I give cash, should I take a look at what I already own?

Appreciated Securities May Be a Natural Starting Point

Publicly traded securities are often among the easiest non-cash assets to contribute.

If you hold a stock or mutual fund that has appreciated substantially, donating the shares directly rather than selling them and donating the proceeds may be more tax efficient.

You may receive a charitable deduction for the contribution, subject to the applicable limitations, while potentially avoiding recognition of the capital gain that would have resulted from selling the investment.

This can be particularly appealing if you are already considering reducing a concentrated position, rebalancing your portfolio or selling an investment with a large, unrealized gain.

In other words, charitable giving can sometimes become part of a broader wealth management strategy rather than being viewed as a separate year-end activity.

A conversation with your client centric team and tax advisor can help you determine whether a particular security is appropriate to donate and how the contribution fits within your overall tax and investment plan.

Timing Matters

If you want a charitable contribution to count for the current tax year, don’t assume that beginning the process in December is sufficient. Asset transfers can take one to two weeks to be completed.

Transfers of securities require coordination among you, your financial institution or custodian, and the charitable organization.

The takeaway is simple: Don’t wait until December 30 to ask how a non-cash gift should be valued, transferred and documented.

Turn Appreciated Assets into Giving Opportunities

As part of your year-end planning, take a fresh look at assets that have appreciated significantly.

Ask yourself:

• Do I own securities with substantial unrealized gains?
• Am I considering selling or rebalancing any of those investments?
• Would a charitable gift fit into my overall tax and financial plan?
• Have I contacted the charitable organization to determine what it can accept and how the transfer should be completed?

The answers may reveal opportunities that would not be apparent from simply reviewing your charitable budget.

Don’t Let a Good Gift Become a Last-Minute Gift

The final months of the year tend to move quickly. October is an excellent time to identify potential charitable assets, discuss the tax implications with your client centric team and contact the organizations you wish to support.

For nonprofits, October is also a good time to make sure your organization is prepared to receive gifts that may look different from the traditional check or online donation.

The best charitable gifts are not necessarily the ones that are easiest to write a check for. Sometimes, the most thoughtful gift is an asset that has appreciated quietly over many years.

Before making your year-end charitable donation list, take a look at what you own, not just what is in your checking account.

If you represent a charitable organization, ask yourself: if a donor called tomorrow wanting to give an asset other than cash, would your organization be prepared to say yes?