Recently one of The Giving Crowd’s partners asked a nonprofit leader, “how many gifts of assets have you received?” The leader responded, “Oh, we have that covered, we receive one every now and then.” Surprised, the partner dug deeper and discovered that the organization’s asset-based gifts were gifts that they received upon the donor’s death – typically stocks, a house, or an occasional piece of land. In many cases, the organization was completely surprised by the gift.
The average American has just 9% of their net worth in cash and 91% in assets. So, a better question to ask is “how much time and investment did your charity commit to strategically identifying and securing prospective gifts of assets?” This is no small question. Consider that there are over 1.3 million nonprofits in America, and they are all focused chasing the same 9%. No wonder donors are fatigued.
Many nonprofits fail to see the impact that pursuing current gifts of assets could have on the fulfillment of their mission. Remember, we are not talking about gifts that come when a person dies; we are talking about donors gifting some of their assets to your cause today.
Every nonprofit has individuals within their database who own appreciated assets (land, apartment buildings, homes, private businesses, even oil and gas royalties). If these assets are sold, it can result in a large capital gains tax liability for the donor. If, on the other hand, the donor gifts some or all of the asset “prior to sale”, the tax liability can be reduced or eliminated entirely and the nonprofit receives what often proves to be the largest gift of the donor’s lifetime. Why? Because the donor didn’t write a check from “after tax dollars”; they instead gave a “pre-tax” gift from their asset pool, often avoiding all capital gains taxes.
“I have always given cash to charity, but in this current environment I am being very conservative with cash for the sake of my business. No one ever asked me about gifting assets but that makes perfect sense.”
This quote is from a very prominent donor to one of the nonprofits my firm works with, after he was introduced to the possibility of using the potential sale of an office building to make the largest charitable gift of his lifetime while greatly reducing his tax liability. The recipient organization quickly realized the importance of developing a strategic plan for cultivating current gifts of assets.
So, if asset-based gifts are so great, why isn’t everyone focusing on them? Well, this is a complicated issue. First, many donors are uncomfortable with a nonprofit staff member looking at their balance sheet. That concern reduces the number of conversations that ever take place. Second, nonprofit staff are often not comfortable or experienced in dealing with the complexities that can be associated with asset-based giving. Finally, nonprofits often assume that donors have advisors who are introducing them to asset-based giving opportunities and if the donor wanted to make this kind of gift, they would take the initiative to do it on their own.
But several decades of experience tells me that this is simply not the case. Many donors who are ideally suited to make asset-based gifts—like the individual selling the office building—have never been introduced to the concept at all. Nonprofits must take the initiative to identify qualified prospects and engage them with confidence to tap into this largely unrealized pool of opportunity.
For more on the hidden opportunity of asset-based giving and how your organization can get serious about cultivating these gifts, check out our free eBook “Five Myths about Asset-Based Giving.”