– Scott Reed
I have been writing my investment column for almost 30 years. It wasn’t long after I started it that I wrote my first column on the fact that how you give to charity can make a big difference in how much money you actually spend. Since that first column I guess I have written about that subject every few years. Maybe I’m just not influential enough or maybe just one man can’t make a difference, because just yesterday I saw a statistic that proved that I haven’t moved the needle on this point.
Karla Valas, who works with Fidelity’s Donor Advised Fund, gave me this stat: 80% of donors to charities have appreciated stock in their portfolio, yet only 21% of donors actually use appreciated stock to fund their gifts. We have to do something about that stat.
The year 2020 has been difficult on so many levels. One of the biggest challenges facing our country is the effect the COVID-19 crisis and the resulting increase in unemployment has had on our citizenry. To put that in different terms, there has been an assault on charities and nonprofits in the USA and across the world. This is a time when charities have to step up and fill the gap left by a medical crisis no one saw coming and our country was poorly prepared for.
The problem is that most charities don’t have a big cash reserve to fall back on when they need to step up. They need help more than ever and the people who are generous enough to help fund good causes need to know how they can maximize those gifts. The short answer is, never give cash or a check if you have appreciated assets that you can give instead.
The cash you give didn’t get in your checking account until after you had paid taxes on it. That means it may have cost you, depending on your tax bracket, $100 to make a gift of $75. If you have some stock that you paid $50 for that is now $100 in value, you could give that instead. Normally, if you sold that stock and gave the proceeds to charity you would owe capital gains on it which, in my state, would cost about $12.50. So your gift would only be $87.50 to the charity. But if you gave the $100 worth of stock to the charity they would get to keep the entire $100 because they don’t have to pay taxes on the money.
The charity gets more money without it costing you anymore to give it. And if you really wanted to keep that stock, you can just take the money that you were going to give and use it to buy more of that stock.
OK, I just read what I have written so far and it sounds complicated … which may be why I haven’t gotten very far with this subject over the years. So let me just say this, “Don’t give cash or checks to charity if you have other assets to give!” There are a lot of ways to make this work for you.
CREATE Foundation Inc. can make it very easy for you to plan out your gifts and then give the money to the charities when it suits you. Your investment adviser can help you. A lot of people can help you. Ask for help! The charities you give to will appreciate it very much. Be careful out there!
