Now is a fantastic time to accelerate your gift-asking strategy. Here’s why.
1. Your donor probably has a portfolio full of appreciated stock. If your donor has money invested in the market right now, he could have stocks up 100%, 200%, or even 300% from their original purchase price. (In fact, if he DOESN’T have appreciated stock in his portfolio, he probably needs a new financial advisor.) If your donor SELLS this stock right now, he will make a boatload of money, but he will also be responsible for taxes on capital gains. Instead, if he GIFTS your organization the appreciated stock, he will probably get a tax write off for the entire appreciated amount—even though he paid a lot less for it. You get the full amount for your non-profit organization. No capital gains taxes are paid by anyone.
2. Your donor’s financial advisor could be about to “rebalance” your donor’s portfolio. Let’s say your donor has a certain percentage of her account that she likes to keep in stocks versus bonds. (Maybe 60% stocks, 40% bonds.) Stocks have risen in value, so her percentages may be off a bit. Her financial advisor may suggest selling off a few of her stocks and buying more bonds in order to rebalance the portfolio, returning to the 60%/40% split. Well, cue up the capital gains taxes again; when these stocks are sold, capital gains are generated, and taxes must be paid. However, another way to balance the account is for her to GIFT your nonprofit some stock instead. Again, capital gains taxes are avoided, and your donor receives the coveted Income tax deduction.
3. Psychologically, many donors LOVE the “Gift of Appreciated Stock” concept. This is a real effect. Your donor is able to give you something that he paid a lot less for. The gift comes out of his investment account instead of his checking account—so it SEEMS like it doesn’t matter as much. And, he gets to avoid paying Uncle Sam taxes while still taking a write-off for the donation. Win, win, win.
4. The CARES ACT cash giving window is closing. Forgetting stock for a minute, let’s get back to good old-fashioned cash. If your donor wants to write you a check, then it may be best for her to do this before year end. The CARES act allows much stronger tax write offs for cash donations (100% of adjusted gross income instead of 60%–among other advantages) during tax years 2020 and 2021. But, this incentive is scheduled to end December 31.
5. The time may be right to ask for multiple-year donations. I have been encouraging my clients to seek both 2021 and 2022 annual gifts right now. Stocks are high, cash giving is incentivized, and we don’t know when we will see this sort of positive giving environment again. If a regular donor normally gives you $2500/year, ask for $5000 to be used for both this and next year’s operating expenses. Your cash flow and your budget will be ecstatic. Additionally, allowing your donor to “skip” a year may provide a great time, next year, to ask for a legacy gift.
Okay, the lawyers are going to be all over this. I have simplified this explanation for the purposes of not boring you to death. There are rules that must be followed that I have not mentioned here. I am not a certified financial planner or an accountant. Donors should ALWAYS check with their advisors before taking my—or anyone else’s—financial advice on the internet.
Special thanks to Thomas A. Siler, Jr. CFP, Senior Vice President of the Siler-Rhea Group, UBS
