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Why use appreciated securities or mutual fund
shares to make a gift? The key word is “appreciated.” Donating long-term
appreciated securities allows you to give away all (or at least some) of your capital
gain, rather than pay taxes on it, and you get a charitable tax deduction besides.
Be sure you have owned the shares at least 12 months
and one day (the IRS definition of “long-term”). If you have a loss in
your shares, you should sell them, claim the loss on your federal taxes, and donate
cash to charity.
You may be able to make a charitable gift and increase
your annual income, especially if you have low-interest CDs or stocks that pay low
annual dividends. A gift
annuity offers you a way to support Smith and lock in a fixed, high rate of return
in lieu of the low rates that CDs and money market accounts are paying. Rates are
based on age.
Are you reluctant to make changes in your investment
portfolio because of capital gains? Do you hold a large position in family stock?
Have you been given stock with a low basis? Many donors are amazed at the diversification
they achieve (without capital gains tax pain) when they fund a charitable
remainder trust that returns lifetime income to them and passes to charity at
their death. Transferring appreciated assets to a charitable remainder trust can
alleviate your capital gains tax issues and provide a way to diversify your income-producing
investments—all while making a charitable gift and receiving a charitable income
tax deduction.
Case Study
Nell ’38 and her husband enjoyed being retired snowbirds, migrating
between New England and Florida.
After her husband’s death, Nell downsized to a smaller home, but she is
still actively traveling and keeping involved with family, friends, and Smith.
“Stable income is important to me. I have been delighted to enter into several charitable gift annuities
with Smith, one as part of my 60th reunion gift. The process was extremely easy, and I now receive guaranteed
income for life. The annuity assets are managed professionally within the college’s endowment, and
I have the satisfaction of knowing that they are working for me and for Smith.”
As she approached retirement from her career in
banking, Molly ’51 had three objectives:
- Increase her retirement income
- Diversify her portfolio—overweighted with
one stock—with minimal capital gains tax
- Support Smith College
A charitable remainder trust helped her achieve
those goals.
“I created a charitable remainder trust for Smith’s benefit, funded by one low-cost security.
This move provided instant diversification, higher yield, and substantial tax benefits. Over time, growth
of principal should increase my income and leave greater capital for Smith. I’m particularly pleased
that these gifts will ultimately benefit the students of Smith College.” |
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