30 May Celebrate variety: Many assets make great gifts to charity
When you’re getting ready to make a contribution to a fund at the McPherson County Community Foundation (MCCF) or other charity, you don’t have reach for the checkbook! Here are other (and typically more tax-savvy) options to consider.
Marketable securities
Gifts of long-term appreciated stock to a donor-advised or other type of fund at MCCF is always one of the most tax-savvy ways to support favorite charitable causes because capital gains tax can be avoided. Gifts of publicly-traded stock, for example, are easy to transfer to a fund. Our team can provide you and your advisor with transfer instructions to make the process simple.
As is the case with a cash gift, the Foundation will provide a receipt for tax purposes, and the gift of stock will be valued at the shares’ fair market value on the date of transfer. When MCCF sells the shares, the proceeds flow into the fund without any reduction for capital gains taxes. This is because MCCF is a 501(c)(3) charitable organization and therefore does not pay income tax. That would not have been the case, however, if you had sold the stock first and then transferred the proceeds to a fund at the Foundation; you would owe capital gains tax on the sale. Especially in cases where you had held the stock a long time and it’s gone up significantly in value, the capital gains hit can be big.
Closely-held business interests
Our team is happy to work with you and your advisor to explore how you might give shares of a closely-held business to a fund at the Foundation. Not only will transfers be eligible for a charitable deduction during the year of transfer (and at fair market value if the shares are held for more than one year), but also these gifts could potentially reduce income tax burdens triggered upon a future sale of the business. Be sure to talk with our team well before any potential sale is in the works; otherwise, you could lose out on tax benefits. Gifts of closely-held business interests are powerful but can be tricky to administer.
QCDs from IRAs
As always, keep in mind that the Qualified Charitable Distribution (“QCD”) is a very smart way to support charitable causes. If you are over the age of 70 ½, you can direct up to $105,000 (in 2024) from an IRA to certain charities, including a field-of-interest, designated, unrestricted, or scholarship fund at the Foundation. If you are subject to the rules for Required Minimum Distributions (RMDs), QCDs count toward those RMDs. That means you avoid income tax on the funds distributed to charity. Our team can work with you and your advisor to go over the rules for QCDs and evaluate whether the QCD is a good fit.
Real estate
Your fund at MCCF can receive a tax-deductible gift of real estate, such as farmland or commercial property, in a variety of ways. An outright gift is always an option; lifetime gifts of real estate held by you for more than one year are deductible for income tax purposes at 100% of the fair market value of the property on the date of the gift, which also avoids capital gains tax and reduces the value of your taxable estate. Other ways to give real estate include a bargain sale or a transfer to a charitable remainder trust which produces lifetime income for the your family.
Life insurance
Don’t overlook life insurance as an effective charitable giving tool, whether by naming a fund at the Foundation as the beneficiary or, in the case of whole life policies, naming the fund as beneficiary and transferring the policy itself. If you transfer a policy, you may be able to make annual, tax-deductible contributions to the Foundation to cover the premiums.
Other “alternative” assets
We are happy to work with you and your advisor to explore options for giving other non-cash assets to funds at MCCF, including:
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Oil and gas interests
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Negotiable instruments
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Cryptocurrency
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Artwork
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Collectibles
We look forward to working with you to explore all the options!