With a gift of securities, donors may deduct the full value of the securities instead of what they originally paid, and donors avoid any capital gains tax they would owe if they sold the stock. This may be a significant tax advantage even if they will not be itemizing deductions this year.
In turn, by allowing your organization to participate in that appreciation, your organization receives greater value than if donors were giving cash.
As you begin making plans for your year-end marketing, there are some simple steps you can follow to generate more gifts of appreciated securities this year and in the future.
1. Don’t ask … don’t get.
One would be surprised to learn that something as common as gifts of appreciated securities is not understood or utilized by even some of your largest donors. Use this as an opportunity to present a quick five-minute explanation to your board or development committee to make sure they understand the tax advantages of noncash assets.
When a donor gives cash or writes a check, ask them if they are aware of the benefits of giving appreciated securities. Having collateral materials, such as a brochure or booklet, as well as information on your website and in electronic communications allows donors to review this giving strategy at their leisure.
2. Make giving easy!
Securities are usually transferred electronically through a brokerage account or, rarely anymore, by issuing stock certificates to the charity. Be certain that more than one person in your organization understands your process for accepting securities. Have detailed written instructions that you can easily send to a donor and also provide concise and actionable directions covering gifts of securities on your website.
3. Prompt follow-through.
A recent industry article cited the lack of follow-through by the donee organization as the most common reason people stop giving. First, make a quick phone call to say “thank you” and to let the donor know the transaction has been completed and then send the written acknowledgment.
The donor bears full responsibility for gift substantiation, yet their deduction will be disallowed without a contemporaneous written acknowledgment from your organization, the donee.
When preparing the acknowledgment, stick to the facts. Provide the:
- Name of your organization.
- Description (but not value) of the non-cash contribution, e.g., “53 shares of XXX stock.”
- Statement that no goods or services were provided by the organization if that is the case.
- Description and good faith estimate of the value of goods or services, if any, that your organization provided in return for the contribution.
- Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits if that was the case.
Remember: It is NOT your organization’s responsibility to value the gift!
4. Check your gift acceptance policies.
Last but not least, be certain that your organization’s gift acceptance policy allows the acceptance of gifts of securities. If it does not, this is another excellent opportunity to get your board “on board” with this smart way to give (see #1).
By Kristin Croone, Sharpe Group Senior Consultant
Kristin is available to assist planned giving, major gift and other staff members of Sharpe Group client organizations with estate gift administration and gift planning strategies. You can connect with Kristin at email@example.com or via LinkedIn.