Giving stocks can have far greater benefits than giving cash directly

BY AKHILA SATISH

“It is to meet the needs of the deserving that the worthy work so hard to acquire wealth.” Tirukural Verse 212

An individual’s choice to donate to any kind of charitable organization is deeply personal and emotional. Often such choices are made in a flash of emotion or connection; perhaps a meaningful photograph of poverty or a well-crafted appeal to a personal circumstance catches our attention. A donation is quickly mailed or sent out— the generous gesture moving from thought to action as rapidly as quarters slide into a red kettle during the holiday season.

However, there are even greater benefits, both for the individual and the charity, that can accrue from thoughtful, planned acts of generosity. One such act is a stock transfer. This is a planned act of generosity with signal benefits for giver and recipient alike. Transferring stock allows an individual to deduct the full value of the stock from their personal tax return, while offering the charity a larger donation. Consider the following scenario: you purchase a stock for $5,000 that is worth $6,500 in five years. At this time, you consider donating $5,000 to a charity you like. Instead of donating $5,000 in cash, you could transfer the stock (now worth $6,500) to the charity. If you were to sell the stock and donate $5,000, you would pay capital gains taxes on $1,500 and deduct $5,000 on your personal tax return. If you were to transfer the stock, the charity would receive the full $6,500, and you can deduct $6,500 on your personal tax return. By transferring the stock, both parties enjoy greater benefits.

The prospect of transferring stock may appear daunting at first. The first question you may have is which stock to transfer. There are many resources and services available to help you make that choice. A good place to start may be by consulting your portfolio advisor. It is important to keep your portfolio balanced over the years, and often you may need to sell stock in order to rebalance. Such reallocation may be an opportunity to transfer stock as a donation. However, be sure to choose a stock that is more than one year old and has gained in price, rather than decreased in price. If the stock has decreased in price, the stock transfer process will not create an increased benefit for the charity or for you.

The second question you may have is how to transfer the stock. You will be pleasantly surprised to see the wide range of organizations, from Fidelity to Cocatalyst, that can help you with stock transfers. These organizations will guide you through the process, creating a straightforward and efficient way to set up the transfer. Many recipients of a stock donations will have processes set up to aid donors in the transfer process. For example, it is easy to donate appreciated stocks to Hindu Heritage Endowment. You can send an email to hhe@hindu.org, and we will send you simple instructions to give to your broker. They will transfer the stocks to HHE without selling them. We will then send you a receipt you may use for a tax deduction.

Donating to any kind of charitable organization is a powerful act of generosity. Knowing that there are practical and thoughtful ways of planning a donation, such as a stock transfer, and understanding the mechanisms of such a donation allows you to maximize that act of generosity for greater impact.

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