Ways to Improve Your Meaningful Charitable Gifts
by Morgan Stonefelt, Solar Cookers International’s Development Manager
Donating stocks directly to charity is one of the most tax-smart and financially savvy ways to make an impact. Donating stocks does not have to be difficult, and it isn’t only for people with high net-worth or large assets. I had a conversation with Solar Cookers International’s Treasurer, Mike Paparian, to learn more about why he likes to donate stocks and why it might be a good option for everyone. We put together some commonly asked questions to provide some information for the next time you are making your philanthropic gifts.
Morgan Stonefelt: How could donating stocks make a difference to Solar Cookers International?
Mike Paparian: I’ve seen the work of Solar Cookers International up close and I know that every dollar I give can make a huge difference in peoples’ lives. Giving stock has allowed me to give more than I would have otherwise, and it eases my tax burden. By giving appreciated stock, you avoid the capital gains tax you would have paid on selling the stock. When you donate stock directly to charity, there’s no capital gains tax to pay and if you are able to deduct charitable donations, you can deduct the full value of the stock donation.
Morgan: Isn’t this sort of thing just for very wealthy individuals?
Mike: I do not consider myself wealthy. I spent my career working for non-profits and the state government. I did, however, buy a few stocks and mutual funds that have done well. I feel great that I can share some these with a group like Solar Cookers International.
Morgan: How can I potentially reduce future capital gains taxes?
Mike: Many investors have stocks that they like and want to hold long-term. Any appreciation of that stock’s value confirms your belief in it, but it can also set the stage for substantial gains when you sell. One strategy some people use is to donate some of your appreciated shares and then buying new shares to reset your cost basis at the current, higher price. This will reduce your future capital gains tax exposure if the stock continues to grow in value.
Morgan: You mean I don’t have to give all my shares of a stock when I donate?
Mike: That’s right. For example, I bought a few shares of a well-known company many years ago and the value of their stock has gone up dramatically. I donated a single share of their stock to Solar Cookers International.
Morgan: Is this something that would be beneficial for a donor’s portfolio?
Mike: Absolutely! If a review of your investment’s gains and losses shows that it’s time to rebalance your portfolio to maximize its performance and optimize for risk, donating stock can give your portfolio the health check it needs! Implementing a donation strategy puts your capital gains to work funding your philanthropy. If you have a financial advisor, talk to them about which assets to put to a better use.
Morgan: Just how easy is donating stocks?
Mike: Donating stocks can be quite simple! I use a discount brokerage and they have a simple form to fill out to donate stocks to a charity like Solar Cookers International. Many people think donating stocks requires a financial advisor, a lot of paperwork or that their charity may not know what to do with their donation. In fact, you can access an easy way to give a stocks to Solar Cookers International here: https://www.solarcookers.org/donate/ways
Morgan: I’ve heard about donating through a Donor Advised Fund - what exactly is a DAF?
Mike: A Donor Advised Fund (DAF) is like a charitable investment account which can be used exclusively to support charities you care about. Instead of donating multiple blocks of stock to multiple charities, you make one donation which is used to fund your giving account. You can then recommend donations from that account to charities. You don’t have to spend all the funds in a single year, you can spread your charity gifts over several years.
Morgan: Do you have to transfer a lot of stocks to set up a DAF?
Mike: The amount needed to set up such a fund can be relatively small, the minimum for the discount brokerage I use is $5,000. The full amount you transfer to the DAF counts as the charitable donation in the year that transfer is made as opposed to the individual donations you subsequently direct to the charities. I set up my own DAF recently and find it a very convenient way to make donations. The brokerage has an online database of most charities, so donating takes just a few clicks. They then send a transmittal letter including any message from me, along with the check.
Morgan: What does SCI Do with the stock they receive?
Mike: SCI sell any stocks received and then puts the funds to good use through our programs.
Morgan: Well, there you have it! Donating stocks does not need to be a mystery. Plus, it’s not only good for you, but a great option for the non-profit you are supporting with the potential for much larger gifts that also benefit you!
If you have any questions on how to make a stock gift to SCI, please contact email@example.com your financial advisor.