Diversify Your Clients' Giving: Smart Alternatives to Cash Donations
June 25, 2024
When your client is preparing to contribute to a fund at the Community Foundation or another charity, remind them that writing a check isn’t the only option! Here are some other (and often more tax-efficient) choices to consider:
Marketable Securities
Donating long-term appreciated stock to a donor-advised or other type of fund at the Community Foundation is one of the most tax-efficient ways to support charitable causes, as it allows the donor to avoid capital gains tax. Transferring publicly-traded stock is simple, and the Community Foundation can provide the necessary transfer instructions. As with cash gifts, the Community Foundation will issue a tax receipt, valuing the stock at its fair market value on the transfer date. Upon sale, the proceeds go into the donor's fund without any capital gains tax, benefiting from the Community Foundation’s tax-exempt status.
QCDs from IRAs
Qualified Charitable Distributions (QCDs) are an excellent way for clients aged 70 ½ or older to support charitable causes. Clients can direct up to $105,000 (in 2024) from an IRA to certain charities, including funds at the Community Foundation, without incurring income tax on the distribution. QCDs can count toward Required Minimum Distributions (RMDs), providing a tax-advantaged giving option.
Closely-Held Business Interests
The Community Foundation can assist with contributions of shares from a closely-held business. These transfers can be eligible for a charitable deduction based on their fair market value if held for more than a year, potentially reducing income tax burdens upon a future sale. It’s important to plan these gifts well before any sale to maximize tax benefits, as gifts of closely-held business interests can be complex.
Real Estate
Clients can make tax-deductible gifts of real estate, such as farmland or commercial property, to their fund at the Community Foundation. Lifetime gifts of real estate held for more than a year are deductible at 100% of the fair market value, avoiding capital gains tax and reducing the client’s taxable estate. Other options include bargain sales or transfers to a charitable remainder trust, which can provide lifetime income to the donor and their family.
Life Insurance
Life insurance can be an effective charitable giving tool. Clients can name their fund at the Community Foundation as the beneficiary or, for whole life policies, transfer the policy itself to the fund. Donors may also be able to make annual tax-deductible contributions to cover the policy premiums.
We look forward to working with you to explore all these giving options!
