Planning Matters

Last fall, technology stocks were booming. Some “tech stocks” saw growth that reached over 10 times their original offering value by year-end 1999. This spring, however, the tech stocks began their wild ride, with many dipping sharply and losing much of their gains in a matter of weeks.

Recently, we have seen tech stocks rebound somewhat, but the relatively rapid market correction may have left some donors wary. What does a rollercoaster tech market mean for gift planners and their donors?

The good news

If the tech market volatility has a silver lining for gift planners, it is this: Traditional planned gift donors and prospective donors are not typically heavily invested in technology stocks. Why? Because, for the most part, older donors have remained primarily invested in what have been termed “old-economy” companies, the big tried-and-true stocks like General Motors and IBM.

Just as organizations tend to invest their endowments and annuity reserves more conservatively and may have suffered fewer losses than more aggressively invested portfolios, so older donors may have experienced less impact from recent market fluctuations.

The opportunity for gift planners is to show older donors who own solid stocks that may be appreciated in value but provide little income that through gift annuities, charitable remainder trusts, and other vehicles they may be able to diversify their holdings, bypass capital gains taxes, enjoy tax deductions, and make what may be a gift of a lifetime.

Strategies for giving

While tech stocks may have experienced the most volatile inclines and drops on the roller coaster of the past few months, the entire investment market has seen its fair share of ups and downs as well. More donors may be concerned about how to make their charitable gifts now that their investment portfolio may have declined or shown little growth this year.

Gift planners need to be prepared for conversations with donors regarding how to give most effectively in the midst of this uncertainty. If a donor has had a considerable loss in a particular stock, you may want to suggest that the donor sell her stock, take a loss for tax purposes, and give the proceeds to your organization. This can make it possible for the donor to benefit from the loss for tax purposes while also enjoying the charitable deduction. In some cases donors may thus be able to take deductions that total more than the current value of the security. A donor may even want to consider using the amount she saved in taxes to repurchase shares of the same stock at a lower cost basis. (See page 6 for more information about this and other giving ideas in the booklet “A Guide to Year-End Giving 2000.”)

And keep in mind that even though markets have fluctuated upward and downward over the years, history has shown that Americans continue to give to their favorite charitable organizations and institutions regardless of the way the market turns.

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