As your clients will likely attest, the going has been rough for many of the nonprofit organizations they support. Turbulent economic conditions, concerns about inflation and challenges in the banking sector are just a few of the factors that are causing donors to be more financially conservative and indecisive about their charitable giving plans.

While this is true, we also know that many of your clients deeply understand the need to support the nonprofit sector and continue giving to the charities they love. Supporting local nonprofits is critical to maintaining and improving the quality of life for residents in our community and citizens nationwide. This is especially true as the number of households giving to charity has declined by more than 16% over the last three years.

As we head into the summer months, it may be a good idea to chat with your clients about their charitable giving budgets for this year. We recommend closely evaluating the types of assets best suited for each charity. For example, as concerns regarding interest rates and inflation continue to grow, you and your clients may decide that preserving cash is a priority. This means that some of your clients who usually give cash to their favorite charities or Donor Advised Funds (DAFs) at KZCF may be reluctant to do so this year.

In the event that your client wants to avoid gifts of cash, giving appreciated, publicly traded stock to charitable organizations is a highly effective tax strategy in any economy. This is because capital gains tax is avoided when your client transfers long-term, marketable securities to a fund at KZCF or other charities. The client is typically eligible for an income tax deduction at the fair market value of the securities. When the charity sells the securities, the charity does not pay capital gains tax. This is a win-win for your client and the charity. Additionally, even in a rocky stock market, not all stocks are down. Many of your clients are likely holding onto long-term stock positions that have appreciated substantially since they bought them, even with the current stock market malaise.

For some clients whose portfolios are down significantly, this may be a year to consider contributing cash to DAFs instead of donating highly appreciated stock. Gifts of cash could reduce the burden on a client’s personal stock positions that may have fallen in value, giving these positions more time to recover and contribute to a DAF with a higher value. This will result in a higher tax deduction for the client.

In uncertain times like these, DAFs can come in handy. Now is the time to discuss charitable giving with clients who regularly add to their DAFs 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 does not mean their 2023 charitable giving must take a hit. These clients can use their DAFs to support their favorite organizations, sometimes at levels consistent with prior years.

As always, we invite you to reach out to us here at KZCF to discuss options for your clients’ charitable giving. We are happy to help you as you work with your clients to achieve their goals!