WHY THE HOW CAN MATTER AS MUCH AS THE WHERE
It’s hard to believe that 2019 is already coming to a close. It feels like just yesterday I was taking my boys to their first spring baseball practice or getting ready to light fireworks on the 4th of July. This year has flow by but as it draws to a close we once again begin the conversation with our clients around year-end charitable donations.
Every year we are asked by clients about giving, what organizations to give to and if we can help them move money from their investment accounts to their checking accounts. While we have a list of organizations we feel strongly about supporting, it’s the conversation about how to give that usually leads to the most important decisions.
Most people who give to charitable organizations don’t know that they will accept stock or other appreciated assets as donations. Most major charitable organizations are set up to receive stocks, bonds, mutual funds, ETF’s and in some cases other types of assets as donations. Donating assets rather than writing a check could save you hundreds, if not thousands of dollars in taxes. Let’s take a look at a real life example.
Many of our clients over the last number years have bought Apple Computer. If we use a purchase date of January 2, 2017 for our example and you purchased 100 shares you would have invested $11,700. Fast forward to 2019 and those 100 shares of Apple would now be worth over $26,500, an almost $15,000 gain.
At this point if you are making a donation to your favorite charity you would have two options. Unfortunately many people in that situation would just sell shares of the stock in the amount of their donation and write a check, but there’s a much better way to do it.
Let’s say you wanted to make a $10,000 year-end donation to the charity of your choice. To net $10,000 of cash you would likely have to sell over $13,000 to net the $10,000 after taxes, a 30% increase. You would be selling about 50 shares of Apple, or about half of your position.
The other option would be to gift the shares of Apple. Using the same $10,000 amount you would simply gift 38 shares of Apple. By gifting the appreciated shares there is no sale that takes place and you are not liable for the capital gains that would have normally been incurred on a sale. Since the charity is a non-profit they also will not pay the taxes on the gains. It becomes a win-win for both you and the charity. Additionally it saves having to sell 12 additional shares just to pay the taxes. If we assume the same growth rate over the next 3 years for Apple those 12 shares could be worth nearly $8,000, that’s a significant amount of money to keep in your pocket. Or maybe a provide a future tax free gifting of shares…
As you think about year-end giving please consider a stock or other in-kind gift. If you have any questions please reach out to us. We’re happy to help and wish you all the best this Holiday Season.
The Cascade Team