When people think about charitable giving, they typically think of giving cash. Monetary donations are straightforward and the simplest way to give, but doesn’t always provide the greatest benefits for donors or impact for charities. Complex assets can be a tax-efficient way to support your favorite charities.
Cash equivalent donations are often well understood by donors, but not everyone understands what gifts fall under the category of a complex asset or the advantages they offer the donor and receiving charity.
Types of complex assets
Ren simplifies the donation process for various types of contributions, even those involving complex assets. We accept a wide variety of non-cash assets, some of the most common being private business interests, private equity, hedge funds, IPO stock, real estate, and passion assets.
Maximize giving with these illiquid assets:
- Privately Held Business Interests
- IPO, Pre-IPO, SPAC
- Private Equity
- Hedge Funds
- Cryptocurrency
- Residential real estate
- Commercial real estate
- Artwork/Collectibles
- Intellectual Property
- Insurance Policy
- Exchange-traded stock options
The advantages of donating complex assets
Highly appreciated complex assets can create some of the most substantial charitable gifts while also maximizing tax benefits for the donor.
Estimates suggest that only 1-5% of wealth is held in cash, which means most people have their wealth in complex assets like real estate, stock, business interests, collectibles, etc. Selling the assets could mean being subject to capital gains taxes, which effectively reduces the value of the gift.
Here are a few of the advantages of complex asset donations:
- Reduce tax burden by avoiding capital gains on highly appreciated asset donations
- Potential to receive an immediate charitable deduction
- Provide support to multiple charities over time with a single asset donation
Why use a donor-advised fund for complex assets
While many donors want to make the most of gifts that are non-cash assets, not all charities can accept them. A donor-advised fund (DAF) is often a great option for donors.
A DAF provides a bridge that liquidates complex asset donations allowing donors to maximize tax benefits and support the causes they care about. DAFs are versatile when it comes to the assets they can accept. They can be opened using cash or publicly held stock, as well as complex assets like shares of a business interest, artwork, or even cryptocurrency.
Once the assets are gifted to the donor-advised fund, the sponsoring charity can liquidate the assets, relieving the donor from the responsibility of capital gains taxes. “We have been seeing an increase of these types of gifts over the past couple of years,” said Kim Ledger, Vice President of Complex Assets at Ren. “With it being so easy to open a donor-advised fund with these illiquid assets, more donors are getting involved in charitable giving every day.”
Outside of a donor-advised fund, these non-cash assets are subject to tax, but when they are donated to the fund, they are eligible to be written off as charitable donations, just as they would if they gifted directly to a charity.
Want to learn more about complex assets?
Unsurprisingly, donations that involve complex assets are more complicated than cash donations, but that’s why we’re here! Our team of charitable giving experts has the experience to guide advisors and donors through the process. If you’d like to learn more about complex assets or donor-advised funds, we’re here to help. Contact us today!
