Gifts of Stock to Charity
How gifts of stock benefit charity and save taxes
Do you have stock, bonds, or mutual funds that have been increasing in value over the years? Did you know you can donate the stocks to charity, bypassing the need to pay capital gains tax? Most charitable gifts are made in the form of cash. But cash is not always the most effective way for donors to give. It is good stewardship to carefully consider the best property to use to make charitable gifts. Donating highly appreciated securities is often an effective way to give to charity, because it bypasses capital gains tax. Many people who own shares of stock, bonds, and mutual funds see their investments increase in value over the years. It may be advantageous for charitable donors to make gifts of stock rather than sell stocks and give to charity after taxes. Giving stock bypasses capital gains taxes.
Such gifts are also tax deductible, based on fair market value at the time of the gift. Donating may eliminate ordinary income tax on up to 30% of your adjusted gross income (AGI) in the year of the gift. Any unused deduction amounts may be carried forward and used to reduce taxes for up to five future years.
Tax savings alone should not be the reason to give to charity. Giving should first be an expression of worship from a heart that loves God, cares for His people in need, and desires for a lost world to hear the gospel. While it is secondary, it is simply good stewardship to save taxes where regulations permit, allowing us to give more funds to charity.
How it works
Anabaptist Foundation can accept your gift of stock, bonds, or mutual fund shares, and convert them into cash for distribution to the charities you recommend. To begin the process of making a gift of stock, contact an Anabaptist Foundation representative who will provide instructions for your broker to initiate the gift into Anabaptist Foundation’s brokerage account.
The gift occurs the day the shares arrive in our account. Anabaptist Foundation then converts your gift into cash by selling it. You will receive an acknowledgement letter listing the date received, number of shares received, ticker symbol and description. You, along with your tax advisor, are responsible for determining the gift value for any charitable deduction.
Stock gifts become the property of Anabaptist Foundation, and the donor retains no legal control over the gift. Instead, the donor is entitled to give non-binding advice to the Foundation about the distribution of the funds.
What happens with a gift of stock
Your donation will be placed into your Charitable Gift Fund (CGF) account, where you have advising privileges. If you do not already have a CGF account, we will provide an application for you to fill out at the time of your stock gift.
Upon receipt, Anabaptist Foundation will liquidate the shares and notify you when the funds are available for disbursement. The confirmation process may take a few weeks.
You may then recommend distributions to your church and other charities you wish to support in accordance with our CGF User’s Guide. Disbursement checks are generally mailed out within two business days after recommendations are received and approved. A letter explaining the gift will accompany the check.
Your donation can also be placed in our Charitable Pooled Income Fund. With this option, you or your beneficiary will receive payments for as long as you live. Upon your death or the death of your beneficiary the remaining funds will then be transferred to the charities you’ve chosen.
How much does it cost?
- Standard brokerage fee of $150 per transaction
- External brokerage fees, if any, are added to the standard brokerage fee of $150
- Complex transactions may result in additional fees in addition to the standard brokerage fee of $150
- In addition to the standard brokerage fee, there is a one-time Charitable Gift Fund fee of .75% of your gift, deducted at the time when the funds are transferred from our brokerage account into your CGF account. There are no additional fees when disbursements are made.
Can I donate well-performing stock and “keep” it?
Perhaps you are reluctant to donate a particular stock that has performed well over the long term, and you expect it will continue to increase in value. There is a way to make a charitable gift of this stock, while in effect, keeping it.
Here’s how: Gift the value of your appreciated stock directly to charity instead of donating cash, thereby bypassing taxes. You can then use the cash you would have otherwise donated to repurchase the same stock. The result? You own the same stock with a new, higher, cost basis.
Can I donate stock that has declined in value?
If you own stock that is worth less than the original cost, it is usually better to sell it and make a charitable gift using the cash proceeds. You may be able to claim tax benefits for both the capital loss and the charitable gift and effectively deduct more than the current value of the stock.
Advantages for donors:
Flexibility – Your gift can be place into our Charitable Gift Fund for immediate disbursement to charity, or our Pooled Income Fund where you receive interest earnings for life. You may choose the plan that works best for your situation.
Freedom – Anabaptist Foundation takes the responsibility to sell your securities, manage the proceeds, and make disbursements to your church and the charities you wish to support.
Avoid capital gains tax – When appreciated securities are donated, the donor does not have to pay tax on capital gains. This leaves more money to go to charity.
Immediate income tax deduction – In the year the gift is made, you get a federal income tax deduction for the fair market value of the securities you owned for more than one year, up to 30% of your adjusted gross income. Any deduction you qualify for above these limits may be carried forward for up to five successive years.
Tax contribution receipt – Anabaptist Foundation will issue a letter of acknowledgment as a contribution receipt to the donor for tax purposes.
Privacy – If you wish to give anonymously, Anabaptist Foundation can act as a privacy screen between the donor and recipient charities.
A case study:
Reuben and Marilyn Brubaker have owned shares of stock for a number of years. They would like to sell the shares, but the value of the stock has increased greatly since they made their initial investment. Their capital gains would be subject to income tax. The Brubaker’s would like to make a special contribution to a camp for handicapped youth and to a few other ministries.
Reuben and Marilyn decide to donate their stock to Anabaptist Foundation for a Charitable Gift Fund. The Foundation then sells the shares and places the cash proceeds into the gift fund. The Brubaker’s get an immediate charitable income tax deduction and avoid tax on any capital gain.
After the sale of the stock, the Brubaker’s recommend disbursement of half of the money to the youth camp. Over the next few years, they make recommendations to disburse the remainder of the funds to several different mission organizations.
NOTICE: This article has been prepared for educational and informational purposes only. It is not legal advice nor legal opinions on any specific matters. You should seek the counsel of your accountant or tax advisor.