Give Real Estate and Other Non-Cash Assets

There’s a major discrepancy in charitable giving that affects you:

  • Most people hold the lion’s share of their wealth in NON-CASH ASSETS like stocks/ bonds, real estate, business interests and personal property (gold, silver, royalties, copyrights, patents).
  • But when these people donate money, they tend to give in CASH.

If you liquidate such non-cash assets you face the following problems:

  • It may not be a seller’s market when you sell.
  • The market may not be very liquid.
  • Selling at a profit may bring heavy taxes on capital appreciation.

Donor Advised Funds help solve these problems by letting you give appreciated non-cash assets instead of writing checks.

By opening a Donor Advised Fund (DAF), you can transfer non-cash assets into your DAF and then sell them for a tax deduction at the donated asset’s fair market value. Here's a real life example of how it works:

Betty and Jim (not their real names) were lifelong givers. Upon reaching retiring age, they had sizeable assets, including shares of stock in a local bank that Jim inherited from his father, and a farm Jim also inherited (with an estimated value of $1,500,000). Over time Jim’s bank stock lost significant value (to the tune of 90%) and the only recourse was to sell and capture a sizable capital loss. After losing so much paper value on the bank stock and gaining so much on the farm, Betty and Jim needed a way to take advantage of capital loss on the stock. While considering these factors, Jim died unexpectedly, and Betty suddenly needed this tax event to occur within a year of Jim’s death. Over the course of several years leading up to Jim’s death, his wealth advisor Michael pieced together a plan for him to sell his farm and simultaneously claim a loss on his bank stock while gaining a tax exemption by deeding 10% of the farm’s value to a Donor Advised Fund in their name at Capstone Legacy Foundation before the time of sale. (Additionally, Michael also arranged for Betty and Jim to fund a charitable gift through a life insurance policy arranged through Capstone.) When Betty finally auctioned her farm, the local school district bought the property for just over $1,900,000 ($400,000 more than the anticipated $1,500,000). With Capstone owning 10% of that value, Betty only had to pay taxes on the remaining 90%, and she was able to use the capital loss. Plus, she was able to advise Capstone what to do with the 10% that went into her Donor Advised Fund. By donating part of her farm’s value before the sale, Betty only had to pay taxes on her remaining portion.

By helping Betty donate some of her non-cash assets, Michael achieved the following major wins:

  1. He lowered her taxes.
  2. He helped her give more to charity.
  3. He increased her personal savings.