Asset-based Giving Another Avenue For Donors to Consider

Perception is reality when it comes to donors. You give what you can to whom you want when it suits you.

You go to events and volunteer on occasion for special work-days or drives or as a board member. You make gifts by buying raffle tickets, sending checks in the direct mail envelope, and going on-line on special “giving days” to conveniently use your credit card.

You consider yourself a supporter of the cause and you are. You give out of available time and discretionary income.

However, you may not be giving assets which can also mean that you might not be giving out of passion and/or you may not be giving strategically.

Why? Here’s where perception comes into play. Asset portfolios are often made up of personal residences, securities, IRA’s, 401ks and other retirement funds, college savings accounts, a vacation home, business ownership or investment real estate. Many donors don’t think of giving in terms of their net worth.

What a missed opportunity for donors and for charitable organizations!

The truth is, anyone can give from assets if they are motivated to do so and if they understand tax-wise giving.

The baby step of giving from assets might be when a donor learns he or she can give appreciated stock and likely will avoid capital gains taxation in addition to getting their charitable deduction. Some donors even decide to gross up the amount of the gift to pass on the significant tax savings.

From the non-profit’s point of view, gifts of stock might be evidence of greater interest in the organization. Other indications are: sustained giving over many years, a pattern of increased giving, or a spike in an expected level of giving.

While appearing to be transactional giving, such gifts may demonstrate a sense of affiliation or loyalty or gratitude or alignment with mission. They may also reveal a donor’s deepening desire to be invited into the circle of concern of an organization in more meaningful ways that stimulate additional relationship-based gifts.

When donors give out of passion they give more and they seek to understand how to give strategically. Conversely, donors who have a vague sense of wanting to make philanthropy a part of their lives may start by learning simple techniques for tax-wise giving.

Whether passion or strategic giving is the trigger, donors who think of their assets as part of their capacity to give move from sporadic or annual support to multi-year thinking and larger outright or deferred gifts. Donors become more invested in the outcomes and in the sustainability of the organization. They make capital gifts, estate gifts, and either current or deferred endowment gifts.

Donors also learn about giving tools when philanthropy becomes part of the their financial planning, hence the dramatic rise in the use of donor-advised funds (DAFs). Charitable gifts are donated to and managed (invested) by a third party public charity. The donors receive a tax benefit in the year of the gift and can recommend when and to what qualified charitable organization(s) distributions are made. Some donors build the DAF in a high gross income year to take advantage of a larger charitable deduction and decide recipients later. The funds grow tax free until dispersed.

While DAF’s are often funded with cash and stocks, some larger fund managers have the capacity to handle complex assets and assist donors in converting them into liquid funds.

DAFs can motivate donors to take a 30,000 foot view to formalize their philanthropic plan. Many start by creating a mission statement to articulate the donor’s passion and even identify specific organizations or categories of organizations. The mission statement might also be a values statement like “to stimulate family decision-making about giving.” The fund then becomes an intergenerational vehicle to teach or learn together about shared philanthropic interests.

DAFs can also be used as a way to create a legacy and many donors prefer DAFs over creating a private foundation.

Gifts directly from retirement accounts are the easiest and most tax efficient legacy gifts, especially in larger estates that might be subject to estate as well as income taxes. Just add a few percent for one or more charities to your beneficiary designations. No will changes are needed.

Giving from assets as well as discretionary income is an important consideration in thinking about both current and deferred charitable giving.

Combine strategic philanthropy with your passion for making a difference. Create a thoughtful giving plan that satisfies both your head and your heart.

Enid M. Ablowitz, CFRE, CSPG, is a veteran advancement professional, author and consultant who is dedicated to educating and guiding donors and non-profit organizations on the art and science of strategic philanthropy.

Originally published by the Boulder Daily Camera on September 15, 2015

‘Til next time — Give Well, Give for Good.