Maybe your stocks have substantially grown since you bought them? Maybe you’ve watched one of your holdings suddenly increase and your portfolio has become unstable? Maybe you just want to consider investing in other categories? If you also give to charity, these scenarios should encourage you to review your investment portfolio with a donation strategy in mind.
Why? Because, according to Fidelity Charitable, donating stock directly to charity is one of the most tax-smart ways to give. Yet, it is often not well understood or widely used.
There are four reasons you should give stock donation a try, according to Fidelity Charitable…
You can give more. By donating stock that has appreciated for more than a year, you are actually giving 20 percent more than if you sold the stock and then made a cash donation. The reason is simple: avoiding capital gains taxes.
You can potentially reduce future capital gains. Many investors have stocks that they love and want to hold for the long term. Any appreciation of that stock’s value confirms your belief in it, but it can also set the stage for substantial gains when you sell. So consider donating some of your appreciated shares and then buying new shares to reset your cost basis at the current, higher price. This will reduce your future capital gains tax exposure if the stock continues to grow in value.
You can give your portfolio a health check. Even with a good diet and regular exercise, your health can get out of balance. So, too, can your stock portfolio. If a review of your investments’ gains and losses shows that it’s time to rebalance your portfolio to maximize its performance and optimize for risk, donating stock can give your portfolio the health check it needs. Implementing a donation strategy puts your capital gains to work funding your philanthropy. Talk to your advisor about which assets to put to a better use.
You can donate stocks without headaches. Some people may not be interested in donating stock because they think it will require a lot of paperwork and phone calls, or that their chosen charity may not be able to easily accept a stock donation. But a donor-advised fund, like a public charity, takes the hassle out of donating stock.
Here is the information you need to donate stock to The Aspen Effect.