November 28, 2023

Gifts of “Complex” Assets Deliver Multiple Benefits

Learn why waiting until the end of the year to complete your giving has a silver lining. As the end of the year approaches, it’s an excellent time to evaluate your portfolio with your advisors to determine whether a gift of complex assets might help you support a critical need in the community while providing key tax benefits for you and your family.

Gifting Securities: Most of the time, gifts of highly-appreciated marketable securities are the most logical non-cash gift. Gifts of publicly traded stock, for example, are easy to transfer to your donor-advised or other type of fund at the Foundation.

Gifts of stock are valued at the shares’ fair market value on the date of transfer to a charitable fund. When those shares are sold, the proceeds flow into your fund without any reduction for capital gains taxes. As a 501(c)(3) charitable organization, the Foundation does not pay income tax. However, if you had sold the stock first and then transferred the proceeds to a donor-advised fund (or other fund), you’d owe capital gains tax on the sale. The capital gains hit can be significant, especially in cases where you’ve held the stock a long time and it’s gone up significantly in value since you bought it.

Real Estate: Cash and publicly traded stock are not your only options for adding to a charitable fund like a donor-advised fund. You can also give assets such as real estate, closely-held business interests, artwork, or other collectibles. Gifts of assets other than cash or marketable securities are sometimes called gifts of “complex assets.” When you give assets like this, the tax treatment of these is the same as gifts of marketable securities in that no capital gains tax will be levied when the charity sells the assets, and, assuming the assets are long-term capital gains property under IRS rules, you’ll be eligible for a charitable deduction at the fair market value of the assets on the date of transfer.

IRA QCD to fund a Charitable Gift Annuity: You can also use “complex” giving techniques to achieve your estate planning and tax goals. For example, if you are over 70 ½, you can execute a Qualified Charitable Distribution from your IRA to a charitable fund, including a designated, scholarship, or field of interest fund. You don’t pay income taxes on the distribution, and if you are required to take Required Minimum Distributions (RMDs) because you have reached the age of 73, the QCD counts toward your RMD.

One of the many components of a new set of laws known as “SECURE 2.0,” which was passed at the end of 2022, is a provision that expands the QCD by adding the opportunity for taxpayers to make a one-time $50,000 QCD transfer to a charitable remainder trust (CRT) or other split-interest gift such as a charitable gift annuity (CGA). This part of the new law is called the “Legacy IRA” provision.

A CGA, like any other annuity, is a contract. The CGAs provide an up-front tax deduction, a steady lifetime income stream, and a remainder gift to a charity, such as your fund at the Foundation, which will receive what’s left over at the end of the income term, such as your lifetime.

Contact Monika Collins with any questions.