Charitable Giving Doesn’t Have to Be Cash
When people think of charitable giving, they often picture writing a check or making an online donation. But for high-net-worth individuals, non-cash charitable donations, such as appreciated assets, can be among the most effective and tax-efficient ways to give.
Appreciated assets are investments (like stocks, mutual funds, real estate, etc.) that have grown in value since you purchased them. Instead of selling the asset and donating the cash, you can gift it directly to a qualified charity, allowing both you and the organization to benefit.
Why Gifting Appreciated Assets Makes Sense
When you donate an appreciated asset you've held for more than a year, you generally avoid paying capital gains taxes on the increase in value. Plus, you may be eligible for a charitable deduction based on the asset’s full fair market value. This creates a win-win: the charity receives a larger gift, and you receive a charitable deduction, thereby avoiding capital gains tax on these assets.
This strategy is especially valuable in years when your income is high or when you’re already planning to support a cause you care about. It also aligns well with donor-advised funds, legacy giving, and multi-year philanthropic strategies.
Examples of Non-Cash Charity Donations
- Donating appreciated stock: If you bought shares for $10,000 and they’re now worth $25,000, gifting the shares directly means avoiding capital gains on the $15,000 appreciation and receiving a $25,000 itemized deduction if you held the asset for over 1 year and it does not exceed 30% of your AGI.
- Charitable gift of appreciated stock through a donor-advised fund (DAF): You can front-load your giving by contributing appreciated assets to a DAF and distributing grants over time. This means if you are in a high tax bracket and expect it to be lower in the future, you could gift assets into the DAF during the year in which your marginal tax rate is high, to receive a higher charitable deduction, while the money sits in your DAF until you are ready to actually send it to the charity.
- Gifting real estate or business interests: These can offer significant impact but require careful planning and due diligence to ensure a smooth transfer and maximum tax benefit.
How Foster & Motley Can Help
At Foster & Motley, we regularly help clients evaluate when, how, and what to give to maximize both their philanthropic impact and financial outcomes. If you're holding appreciated assets, we can help determine whether a non-cash gift fits your goals and work with your tax and legal team to implement the strategy effectively.
Charitable giving is personal, but it can be even more effective with a comprehensive approach to wealth management. Schedule a discovery call today to learn more about fostering life’s wealth.
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