As your philanthropic clients can likely attest, the going has been rough for many of the nonprofits they support. Turbulent economic conditions, concerns about inflation, and challenges in the banking sector are just a few of the factors causing donors to be more financially conservative and perhaps begin to evaluate whether to keep their charitable giving at the levels of years past.
At the same time, many of your clients deeply understand the need to support the nonprofit sector as support for nonprofit organizations is critical to maintaining and improving the quality of life in our region. This is especially true as the number of households giving to nonprofits has declined by more than 16% over the past three years.
As we head into the summer months, it’s a good idea to touch base with your clients about their charitable giving budgets for 2023. Evaluate the types of assets that are best suited for each client to donate. Sometimes, it will be best for your clients to give cash. In other cases, stock will be more appropriate for the client and beneficial for the nonprofit.
For example, as interest rates and inflation continue to increase clients’ concerns about their household finances, your clients may decide that preserving cash is a priority. Some of your clients who have typically given cash to their favorite nonprofits or to their Donor Advised Funds at the Omaha Community Foundation may be reluctant to do so this year. There’s a silver lining here: Giving appreciated, publicly-traded stock to nonprofits is a highly effective tax strategy in any economy. This is because your client can avoid capital gains taxes when they transfer long-term, marketable securities to a fund at the Omaha Community Foundation or another nonprofit organization. The client is typically eligible for an income tax deduction at the fair market value of the securities. When the nonprofit sells the securities, they do not pay capital gains tax. This is a win-win for your client and the nonprofit. And even in a rocky stock market, not all stocks are down. Many of your clients likely holding long-term stock positions that have appreciated substantially since they bought them.
On the other hand, for some clients whose portfolios are down significantly, this may be a year to consider contributing cash to a Donor Advised Fund instead of stock. Donating cash could reduce the burden on a client’s personal stock positions that may have fallen in value dramatically, giving these positions more time to recover value and, at some point in the future, be contributed to a Donor Advised Fund at a higher value, which would result in a higher tax deduction.
In turbulent times like this, Donor Advised Funds at the Omaha Community Foundation can come in especially handy. Now is the time to discuss charitable giving with those clients who regularly added to their Donor Advised Funds throughout the market’s long bull run. If these clients intend to ride out today’s market conditions in their personal portfolios, an up-and-down stock market doesn’t mean their 2023 charitable giving must take a hit. These clients can use their Donor Advised Funds to support their favorite organizations, even at levels consistent with prior years.
As always, please reach out to the Omaha Community Foundation to discuss options for your clients’ charitable giving.