Writing checks to favorite charities and giving online with a credit card are very common ways your clients no doubt support the causes they care about. Remember, though, that although convenient, cash may not be the best way to give. 

Innovia works with hundreds of individuals, families, and advisors to structure the most effective strategies for each client’s philanthropic goals, while also aligning with a client’s tax and estate planning objectives.

Here is a checklist to guide your client discussions as you determine the best assets to contribute to a donor-advised or other type of fund at Innovia, or support charities in general. We’ve also included important tips reflecting recent legal trends to help you avoid pitfalls. 

Appreciated stock

We mention it a lot, and it is worth mentioning again! Donating long-term appreciated stock instead of cash allows a client to avoid capital gains taxes on the appreciation and claim a charitable deduction up to the stock’s full fair market value. It’s worth reminding clients that appreciated stock is nearly always a better gift than cash. Plus, the community foundation makes the transaction easy and seamless.

Pro Tip

You’ve probably noticed that employee equity is becoming more common among your clients. Indeed, an estimated 25 million employees in the United States participate in broad-based employee ownership programs, including ESOPs, stock options, and stock purchase plans. In particular, many fast-growing companies issue “restricted stock units” and “incentive stock units” as forms of compensation. Your clients may ask if they can donate this type of asset to a fund at Innovia or another charity. That’s possible under certain circumstances, such as after units are vested, and assuming that the units are eligible for charitable donation (which is often not the case because of restrictions on transfer or sale). 

Real estate

In some cases, it makes sense for a client to transfer real estate, such as farmland or commercial property, to a fund at Innovia. Lifetime gifts of real estate held 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 avoids capital gains tax and reduces the value of a client’s taxable estate if estate tax is expected to be an issue. 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. We can help with all of these transactions. 

Closely-held business interests

If your client owns a business, our team is happy to explore options for donating shares. Not only will transfers be eligible for a charitable deduction during the year of transfer, but also the deduction to a public charity (such as a fund at Innovia) is calculated based on fair market value if the shares are held for more than one year. Plus, these gifts could potentially avoid capital gains tax triggered upon a future sale of the business.

Pro Tip

Steer clear of the step transaction trap when you’re working with a client to transfer real estate or closely-held stock to charity. A sale can’t be a foregone conclusion. Timing and careful planning are everything to avoid risking a client’s charitable deduction. 

Other “alternative” assets

We are happy to work with you and your clients to explore options for giving other non-cash assets, such as oil and gas interests, negotiable instruments, cryptocurrency, artwork, and collectibles.

Pro Tip

Pay close attention to valuation requirements for gifts of alternative assets. Time and again, the courts uphold strict adherence to the IRS’s requirements for substantiating a charitable deduction. Not just any old appraisal will do; an appraiser must hold the necessary qualifications and the appraisal itself must be sufficiently detailed. 

As you review your clients’ assets, please reach out to our team. We are always happy to serve as a sounding board for options that can help your clients achieve both their charitable and financial goals. We look forward to hearing from you!