How to
donate stock
to a favorite charity
Given the long running bull market and the gains it has generated for stock investors, it is not surprising that charitably-minded investors are looking into ways they can donate some of their highly-appreciated stock holdings to a favorite charity either immediately or upon their death. If youre thinking of making such a gift, here are some points to consider.
Tax Advantages
There are some significant potential tax advantages for making a gift of stock (or other highly-appreciated asset like real estate) to a favorite charity or other non-profit organization such as a college or university. Generally, you can:
- Receive an immediate tax deduction for the value of the donated stock at the time you donate it.
- Avoid paying huge capital gains taxes on stock that has appreciated significantly in value since you purchased it.
- Reduce your taxable estate by donating stock to a charity. If you have a sizable estate, that can divert the money in that stock away from the IRS and into the coffers of your charity.
The rules governing these donations and applicable tax benefits can be quite complex, however, so please consult with your accountant or financial adviser about your personal situation before taking any action.
Retaining Income
There is a way to donate stock to a favorite charity without totally giving up the financial benefit of that asset. Using what are called Charitable Remainder Trusts or Charitable Gift Annuities, you can donate stock, enjoy certain immediate or estate tax advantages and receive an income stream from your donation for a specific period of time, such as your lifetime, the combined lifetimes of yourself and your spouse, or even through your lifetime and those of your children. If you have a sizable portfolio of stock to donate, a Charitable Remainder Trust may be the best choice for you; smaller gifts generally can be made most efficiently via a Charitable Gift Annuity. Talk with your financial adviser about these options.
Considerations
Before
you donate any stock, of course, be sure that you will have sufficient
funds for the long-term and can afford to give up the value of
the stock. Also, although there are tax advantages, we recommend
that you make the gift primarily because you want to support
the work of a particular charity or organization. The tax advantages
of your gift are simply the icing on the cake.
Its a good idea to
talk with your children about any asset you plan to give to charity,
especially if it is part of your estate plan. If they feel badly
about losing the financial benefit of that asset, you may want
to purchase life insurance as part of your estate. Upon your
death, proceeds from this insurance can provide money to your
children that replaces the value of the donated asset without
being subject to estate taxes.
Editors Note: Excerpted from Financial Forum, a newsletter for Kirkpatrick Pettis Clients, now celebrating 75 years of investment excellence, 10250 Regency Circle, Ste. 400, Omaha, NE 68114. After you have talked with your financial adviser and have decided you want to include donating stock in an estate plan, Kirkpatrick Pettis can help. Contact the estate planning specialists at Kirkpatrick Pettis Trust Company. For an office near you call (402) 397-5777, toll-free 800-776-5777.
