Jumpstart endowment growth with donors’ gifts of stock
Most of your donors have been made aware, often repeatedly, that giving highly-appreciated stock to favorite charities is a very tax-effective strategy. Indeed, gifts of shares held for more than a year are typically deductible by the donor at fair market value. When the charity sells the shares, the charity receives 100 cents on the dollar because nonprofit organizations don’t pay income tax. The net-net here is that the donor (1) benefits from a favorable income tax deduction, (2) avoids the capital gains tax that would have been triggered if the donor had sold the shares and used the cash proceeds to make the gift to charity, and (3) maximizes value for the charity.
So, with all of these benefits, why do so many donors forget about giving stock when they’re ready to make a gift to your organization or your organization’s endowment fund at the community foundation? Sometimes a donor is in a hurry, doesn’t think it through, and writes a check before realizing that it would have been better to give stock. Sometimes a donor assumes it will be too much of a hassle to pursue a stock gift. Most of the time, though, a donor simply forgets.
This is why it is so important for your organization to mention the benefits of giving stock in nearly every fundraising communication. At any point in time, during any year and any month, regardless of whether the stock market as a whole is up or down, at least a few of your donors will be sitting on highly-appreciated stock. Those are the donors who need to hear the message. Already in 2024, for example, several stocks are hitting milestone one-year performance marks. Assure your donors that giving stock to your endowment fund is very easy. Seamless processing for stock gifts is one of the many benefits of establishing your organization’s endowment fund with the community foundation.
As always, please reach out to the community foundation for ideas and strategies to build your endowment fund through donors’ gifts of stock. We’d love to help you seize the opportunity!
How donor-advised funds help charities stay afloat
You’re no doubt familiar with donor-advised funds, especially if some of your donors use their donor-advised funds at the community foundation to support your organization. What you might not know is that the national average annual “pay-out rate” for all donor-advised funds is 18%, and most donor-advised funds make at least one grant per year. Furthermore, donor-advised funds help many individuals and families get involved in organized giving at a low barrier to entry. Indeed, nearly half of all donor-advised funds carry balances less than $50,000. To dive deeper into these and other insights, we suggest taking a look at the Donor Advised Fund Research Collaborative’s recently-released study.
At the community foundation, we are committed to growing philanthropy, connecting donors to the causes they care about, and leading on critical community issues. An important part of our mission is offering donors a wide range of ways to give to the charities that are most important to them. In many cases, establishing a donor-advised fund, field-of-interest fund, designated fund, or other type of fund at the community foundation helps a donor unlock assets for charitable purposes that would otherwise be difficult to tap. This is especially the case with highly-appreciated, noncash assets such as closely-held stock and real estate. We also make it easy for donors to structure long-term giving plans and bequests so that they can maximize their support for you and other favorite nonprofit organizations and involve their families, too.
Please reach out anytime if you’d like to learn more about the community foundation’s mission to grow philanthropy for our entire region.
Your endowment fund: A primer for your board of directors
If your organization has established an endowment or agency fund with the community foundation, your staff and board of directors are already experiencing the benefits of our relationship. We are here to help you grow critical financial resources to support your important mission well into the future.
Many nonprofit organizations who work with our team appreciate the opportunity to periodically review with their directors the benefits of working with the community foundation, whether at a board meeting or in a board communication. Here are points you can include in your next endowment update to your directors:
–The organization has established a fund at the community foundation because of the community foundation’s services to help charities efficiently and effectively set aside endowment reserves and rainy day funds.
–The team at the community foundation is adept at navigating the specific accounting standards that are unique to this type of arrangement. The community foundation’s depth and breadth of experience allows the organization’s staff and board of directors to focus on deepening relationships with donors and carrying out its mission in the community.
–The community foundation team helps nonprofit organizations establish and regularly update investment policies and gift acceptance policies, making it easier for the staff and board to engage in fundraising discussions. Our team is happy to attend a board meeting to review planned giving and endowment-building strategies.
–The community foundation team can help your organization accept and process donors’ gifts of highly-appreciated stock, real estate, closely-held stock, and other complex assets, giving your fundraising a big boost.
An endowment or agency fund at the community foundation is a powerful tool to help secure your organization’s financial future for generations to come. Thank you for the opportunity to serve as your behind-the-scenes back office. If your organization has not yet established a fund at the community foundation, please reach out. We’d love to explore how the community foundation’s tools and services can help you grow donors’ support for your mission.