Don’t give up on stock gifts
It’s easy to get discouraged watching the financial news as the stock market swings up and down (and down). Remember, though, not every stock is down! This means you should not give up on talking with your donors about the benefits of donating highly-appreciated stock to support your mission.
When a donor gives appreciated stock held for more than one year (a long-term capital asset) to your organization or another public charity instead of selling it outright, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping your donor’s overall income tax situation.
Occasionally, though, even when the numbers make sense, a donor may be reluctant to give stock because of an emotional attachment to the shares. This can be overcome! Your donor can donate shares of the highly-appreciated favorite stock and then immediately repurchase the same shares in the donor's personal investment portfolio. This essentially resets the donor’s cost basis to the current price, which could help reduce capital gains taxes on a future sale.
Sometimes a donor will want to give a block of shares to support your organization as well as others. Please give us a call in situations like this. We can help your donor establish a fund at the community foundation to receive the stock gift. The community foundation will sell the stock and the proceeds will flow into the fund. Then, those proceeds can be distributed to your organization and the other organizations according to the donor’s intentions.
QCD, QCD, QCD--repeat, repeat, repeat
You may have noticed that we mention the Qualified Charitable Distribution (QCD) in nearly every edition of our newsletter. There is a reason for that! The QCD is an elegant and effective planning tool that can work wonders for your organization and for your donors. Your donors who are required to take Required Minimum Distributions (RMDs) from their IRAs and other qualified plans still must do so even if the market is down, so don’t hesitate to raise this idea with a donor even when the stock market is making wild swings.
As a reminder, we may see even more good news about QCDs before 2022 is over. Proposed provisions of legislation known as SECURE 2.0 would enhance QCDs by indexing the $100,000 annual allowance for inflation and adding a provision for a one-time $50,000 distribution to a charitable remainder trust or other split-interest gift vehicle. SECURE 2.0 could pass through Congress by the end of the year.
Shell funds and building a bright future
August is national Make a Will Month, creating the perfect opportunity to reach out to donors to invite them to consider making a bequest to your organization. Your donors may be more open to setting up a bequest this year if they are hesitant to give cash or stock because of inflationary (and maybe even recessionary) pressures in the economy.
Be sure to mention a tool called a “shell fund” to donors who support your organization as well as several others. These donors may wish to leave bequests to multiple organizations, including yours. The community foundation can work with you and the donor to establish a special vehicle called a shell fund to receive a bequest after the donor passes away. The money will be distributed to your organization and the others with the help of community foundation's stewardship and oversight to ensure that the donor's intentions are followed.
Two items of note:
–A bequest to a shell fund by way of a donor's qualified retirement plan beneficiary designation is an especially effective tool to support your organization and others. That’s because funds flowing directly to a shell fund at the community foundation from a retirement plan after the donor’s death will not be subject to income tax or estate tax.
–Bequests are ideal vehicles to grow your endowment or reserve fund. If you’ve not yet established an endowment or a reserve fund, or if you’d like to explore ways to work with the community foundation to grow your existing endowment or reserve fund, please reach out. Our team not only can help administer and invest your endowment or reserve fund, but can also provide behind-the-scenes assistance to help you grow it.
We look forward to hearing from you about how we can help you maximize the Make a Will Month opportunity with your donors!
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.