What If You Gave the Stock Instead of Selling It?
When you're planning to make a charitable gift, cash may seem like the obvious choice.
You decide how much you want to give. You sell an investment if you need the cash. Then you make the donation.
Simple enough.
But if you already own an investment that has increased significantly in value, there may be another question worth asking before you sell:
What if you gave the investment instead?
Start With the Giving You Already Intend to Do
This isn't about looking through your portfolio for something to give away.
The charitable goal comes first.
Maybe you regularly support a particular organization. Maybe you're planning a larger year-end gift. Or perhaps charitable giving has simply become a more intentional part of your financial plan.
Once you know you intend to give, you can begin thinking about what asset you use to make that gift.
That's where appreciated investments may enter the conversation.
Selling the Investment and Giving Cash
Suppose you own stock that you purchased years ago for substantially less than it's worth today.
If you sell the shares, the increase in value may result in a taxable capital gain.
You can then use the proceeds to make your charitable gift.
But if the shares are eligible and the receiving charitable organization can accept them, another possibility may be to contribute the appreciated shares themselves.
In that case, you may be able to make the charitable contribution without first selling the donated shares and realizing the capital gain on those shares.
Depending on your circumstances and applicable tax rules, the contribution may also qualify for a charitable deduction.
That's why what you give can matter alongside how much you give.
Where a Donor-Advised Fund May Fit
Sometimes you know you want to make a charitable contribution, but you aren't ready to distribute all of that money to individual organizations immediately.
That's one reason a donor-advised fund, or DAF, may be worth exploring.
A DAF is a charitable giving account established with a sponsoring charitable organization.
You contribute eligible assets to the DAF. The sponsoring organization assumes legal control of those assets, and you retain advisory privileges that allow you to recommend grants to eligible charities over time.
That creates two separate moments:
The contribution to the DAF.
And later:
The grants you recommend to charities.
They don't necessarily have to happen at the same time.
Now Bring the Portfolio Back Into the Conversation
Remember the investment we started with?
Perhaps it hasn't simply appreciated. Maybe it has also become a larger portion of your portfolio than you intended.
If charitable giving is already part of your plan, contributing some eligible appreciated shares may allow two goals you're already considering to overlap:
Making the charitable contribution you intended to make.
Reducing the size of an appreciated position without first selling the donated shares.
That doesn't automatically make it the right strategy.
But it does make it a conversation worth having before you simply sell the investment and write a check.
Coordinate Before You Transfer Anything
This is one of those planning decisions where the details matter.
The type of asset, how long you've owned it, the organization receiving it, charitable-deduction limitations, documentation requirements, and your individual tax circumstances can all affect the outcome.
And transfers of investments can take time.
That's why this isn't a December 30 decision.
If you're considering using appreciated investments for charitable giving this year, starting the conversation now gives your financial, tax, and charitable professionals time to coordinate before anything moves.
Before You Sell, Ask One More Question
If you're already planning a charitable gift and also considering selling an appreciated investment, don't assume those have to be two separate transactions.
Ask:
Could the asset I already own be part of the gift I already intend to make?
If you'd like to explore how an appreciated investment and your charitable goals may fit together within your broader financial plan, let's start the conversation.
Wisdom Financial is a DBA of John Boyer, Inc. Fee‐based advisory services offered through John Boyer, Inc, a Registered Investment Advisor. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
This material is for educational purposes only and is not intended as tax or legal advice. Charitable-giving strategies and their tax treatment depend on individual circumstances and applicable rules. Consult your tax and legal professionals regarding your specific situation.
