Did you know that less than 10% of America’s wealth is held in cash? It’s true. Most of our assets are things like real estate, retirement accounts, and stock portfolios. Furthermore, the tax benefits for donors making gifts of non-cash assets can be greater than gifts of cash, and research by Russell James, PhD showed that charities that accept non-cash gifts grew their fundraising by up to 66% more than their peers who didn’t!
Despite those facts, the vast majority of dollars given to charity each year are in the form of cash.
If most wealth is held in non-cash assets, and non-cash gifts offer more benefits to both donors and charities, why aren’t more people donating things like real estate, retirement accounts, and stock? In my experience, the reasons are two-fold:
1. Charities don’t ask for non-cash gifts.
2. Donors don’t know they can make non-cash gifts.
Why don’t charities ask for non-cash gifts? The short answer is that they can be intimidating. Most nonprofit staffers don’t have experience in wealth planning, so starting a conversation with a donor about making a complicated, non-cash gift can be scary. No one wants to look foolish or make a mistake.
Thankfully, non-cash gifts are becoming more common, and there are more resources out there to help nonprofits feel confident accepting them. Here are a few examples:
- Donate Stock facilitates gifts of stock for nonprofits
- The Giving Block facilitates gifts of cryptocurrency for charities.
- Donor Advised Funds (DAFs) are specially designed to accept non-cash gifts, liquidate them (often tax-free), and then grant cash to the donor’s favorite charities. DAFs are offered by community foundations, large financial institutions, and some larger individual charities.
My entire business focuses on helping charities accept more non-cash gifts, so I wrote a step-by-step guide to help them out. It’s called Turning Wealth Into What Matters. It’s designed to teach nonprofit staff the basics of each asset type, what information to collect from the donor, potential risks to be aware of, and exactly how to proceed from start to finish.
Getting started can be scary, so I have some simple advice to help charities take the first step in accepting, and talking about, non-cash gifts.
Here I’ll focus on three key gift types, because they’re the simplest and most common. Once those start rolling in (and they will) you’ll have additional capital to start investing in a more robust program and expanding the variety of gifts you’re set up to facilitate:
Gifts of Stock
Appreciated stock is THE MOST financially beneficial gift to make during life. Donors transfer stock to their favorite charity and receive an income tax deduction for the full fair market value of that stock–even if it’s now worth much more than they paid for it! If someone has a stock portfolio, I bet you dollars to doughnuts it’s worth a lot more than the cash in their checking account. And most charities have the ability to accept a gift of stock! Most stock can be transferred electronically from the donor’s account to the charity’s account.
Qualified Charitable Distribution (QCD) or “Charitable IRA Rollover”
This gift type could be the best thing to ever happen to charities in America. I say that because right now Americans hold over $9 Trillion in IRAs (Individual Retirement Accounts). We’ve been really good about socking money away for retirement for decades. When an IRA owner turns 72, they MUST start taking annual distributions called Required Minimum Distributions (RMDs) that are nearly always 100% taxable. These distributions can be very large—four, five, even six figures large. Many people don’t need or want all that extra taxable income. A donor can send the unwanted portion (up to $100,000 per year per person) to their favorite charity via a Qualified Charitable Distribution (QCD), also known as a “Charitable IRA Rollover.” To facilitate these types of gifts from your donors, consider adding this key information to your website: your organization’s legal name, address, and federal tax ID.
Donor Advised Fund (DAF)
I’m a big proponent of Donor Advised Funds, because they make giving streamlined and allow donors to make big gifts of non-cash assets to benefit even the smallest charities. I’m asked on an almost-daily basis from charities I coach, “How can we access all that money sitting in DAFs?” Here’s the answer: start asking for it. Don’t ask the administrator of the fund. Ask the donors you already have.
Ask your donor(s): “Do you or someone close to you have a donor advised fund?”
If the answer is “YES”, the next question could be:“Would you consider making a grant from that fund to our organization?”
If they’re already a donor and they’ve already set money aside in a DAF for charitable giving, it’s likely they will consider requesting that grant!
How do we raise awareness of non-cash gifts among donors?
Communicate with stories – not facts and figures! Humans learn best through stories. We are also inspired when we read a story. That’s how our brains are wired. So, when communicating these three gift types, I recommend telling stories of someone who made a gift like it. If possible and with their permission, share their name and photo. Share the donor’s words about why they made this type of gift. Share what it did for the charity and what it did for the donor—both financially and personally.
I advise charities to consider adding additional boxes on annual fund appeal letters to include:
- “I would like to make a gift of stock.”
- “I would like to make a Qualified Charitable Distribution from my IRA.”
- “I plan to request a grant of $XXX from my Donor Advised Fund.”
When it comes to non-cash gifts, we’ve only just begun to tap the tip of the iceberg. Charities are becoming more confident about accepting non-cash gifts, and more donors are becoming aware of the benefits of non-cash gifts. These gifts amplify what charities can accomplish because they are so valuable. I look forward to the day when charities of all sizes receive non-cash gifts on a regular basis and their vital services to our communities experience an explosion of growth!
Dana J. Holt, JD RICP AEP® CAP®
Dana is an author, charitable gift planning educator, professional speaker, and consultant. She teaches fundraisers how to raise millions more by accessing wealth, not just cash. Before starting HOLT Consulting Dana began her career as an estate planning attorney and then spent 13 years at a Fortune 300 Financial Services company. She helped wealth advisors all over the U.S. with their most complex cases and taught them how to integrate charitable planning into their practice.
Dana has been quoted in Forbes and has been a featured writer for the Thomson Reuters Estate Planning Journal. Dana teaches gift planning through public speaking, her online training program, and book: Turning Wealth Into What Matters: A Practical Step-by-Step Guide to Accepting Non-Cash Gifts. Dana is a graduate of Mitchell Hamline School of Law and Southern Illinois University. She served as Chair of the Minnesota Gift Planning Association in 2020 and 2021 and is an avid gardener at her home in the Twin Cities, where she lives with her retired racing greyhound.