When you think about charitable giving, you probably think of giving cash, making an online donation, or writing a check and dropping it in the mail. Monetary donations are straightforward and the simplest way to give, but it doesn't always provide the greatest benefits for donors or impact for charities. Complex assets can be a tax-efficient way to support your favorite charities in a big way.
Cash equivalent donations are often well understood by donors and nonprofits alike. However, not everyone understands what types of gifts fall under the category of a “complex asset,” and not every nonprofit is able to accept them. Truman Heartland can accept a wide range of non-cash assets, including (but not limited to) appreciated securities, real estate (e.g. farmland), and life insurance.
If you were to sell your appreciated stock, bonds, or mutual funds with the plan of donating the sale amount to charity, you would still be obligated to pay capital gains tax. It would be an amazing gift for any nonprofit to receive, but there could be a substantial tax burden for you. When you donate appreciated securities, you’ve had a while (more than a year) to a Donor Advised Fund or other charitable vehicles; you will be able to claim a federal income tax deduction for the full, appreciated value of the securities. Plus, you will not incur any capital gains tax. It’s a tax-wise option that can make a huge impact on a nonprofit.
Real estate, for example, is another valuable complex asset that can be turned into a donation. Donors who have held on to their property for more than a year can turn their real estate into an extraordinary charitable gift. By donating the property, you can claim a charitable deduction for the fair market value of the real estate. The property can then be sold (or held by the nonprofit) without any impact on your charitable deduction.
You can also use your life insurance policy as a donation by simply naming your favorite charity as the beneficiary of your policy benefits. To do this, just request a “Change of Beneficiary” form from your insurer. This change is revokable, meaning you can change your mind at any point in the future, should your circumstances change. This is a great way to maintain flexibility in your giving; however, there is no income tax deduction for revokable gifts.
You can get income tax benefits if you donate your life insurance during your lifetime. All you have to do is donate the policy to a nonprofit, take the deduction, and, if you are still making payments, you may qualify to deduct your future premium payments, as well. Check with your professional advisor to see what your deduction might look like with this type of strategy. Because life insurance is often very affordable, this is a popular strategy for leaving a sizable gift at a low cost.
Truman Heartland Community Foundation is here to help you do more with your giving. We are happy to discuss your complex asset donation with you and your financial advisor. Please reach out to Cole Eason, Vice-President of Advancement, to schedule an appointment to further discuss your options at firstname.lastname@example.org or 816.913.4182.