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Celebrate variety: Many assets make great gifts to charity

Celebrate variety: Many assets make great gifts to charity

When your client is getting ready to contribute to a fund at the FM Area Foundation or other charity, remind them not to reach for the checkbook automatically! Here are different (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 the FM Area Foundation is always one of the most tax-savvy ways to support favorite charitable causes because capital gains tax can be avoided. For example, gifts of publicly traded stock are easy to transfer to a fund. The team at the FM Area Foundation can provide you and your clients with transfer instructions to simplify the process.

As is the case with a cash gift, the FM Area 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 the FM Area Foundation sells the shares, the proceeds flow into the client’s fund without any reduction for capital gains taxes. The FM Area Foundation is a 501(c)(3) charitable organization and therefore does not pay income tax. That would not have been the case; however, if the client had sold the stock first and then transferred the proceeds to a fund at the FM Area Foundation, the client would owe capital gains tax on the sale. The capital gains hit can be significant, especially in cases where the client has held the stock a long time and it’s gone up significantly in value.

Closely held business interests

The FM Area Foundation team is happy to work with you and your client to explore how the client might give shares of a closely held business to a fund at the FM Area 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 these gifts could potentially reduce income tax burdens triggered upon a future business sale. Be sure to talk with our team 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 brilliant way to support charitable causes. If your client is over the age of 70 ½, the client 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 FM Area Foundation. If your client is subject to the rules for Required Minimum Distributions (RMDs), QCDs count toward those RMDs. That means your client avoids income tax on the funds distributed to charity. Our team can work with you and your client to go over the rules for QCDs and evaluate whether the QCD is a good fit.

Real estate 

Your client’s fund at the FM Area Foundation can receive a tax-deductible gift of real estate, such as farmland or commercial property, in various ways. An outright gift is always an option; lifetime gifts of real estate held by the client 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 client’s 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 client and the client’s family.

Life insurance

Don’t overlook life insurance as an effective charitable giving tool, whether by naming a client’s fund at the FM Area Foundation as the beneficiary or, in the case of whole life policies, designating the fund as beneficiary and transferring the policy itself. If your client transfers a policy, the client may be able to make annual, tax-deductible contributions to the FM Area Foundation to cover the premiums.

Other “alternative” assets

The FM Area Foundation is happy to work with you and your clients to explore options for giving other non-cash assets to funds at the Foundation, including:

  • Oil and gas interests
  • Negotiable instruments
  • Cryptocurrency
  • Artwork
  • Collectibles

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You have the power to make a positive impact in two ways. You can donate to one of our 500 existing funds, or you can contact us to create a charitable fund that matches your values. Whichever route you choose, we are humbled by your trust and grateful for your kindness and generosity.

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