The greatest wealth transfer in history has begun. And much of that transfer will be in non-cash assets such as stocks, real estate, businesses, and other valuables. Tax implications will present opportunities to nonprofit organizations to receive non-cash gifts in 2024.
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Non-cash giving is the donation of assets other than cash to nonprofit organizations. This type of giving encompasses a wide range of assets, including stocks, bonds, real estate, artwork, and other valuable items. Unlike traditional cash donations, non-cash contributions offer donors an alternative means to support their chosen causes, often with added tax benefits and without directly impacting their liquid capital.
For nonprofits, accepting non-cash gifts opens doors to substantial new funding sources, enabling them to diversify their revenue streams and potentially tap into larger donations that reflect a significant portion of the donor’s wealth. This form of giving represents a shift in donation strategies, aligning with the evolving nature of wealth and providing an avenue for more impactful philanthropy.
The landscape of American wealth is heavily skewed towards non-cash assets. Astonishingly, about 90% of the nation’s wealth is tied up in non-cash assets, ranging from stocks and real estate to valuable collectibles. Despite this, a disproportionate 80% of charitable giving occurs in cash.[i] This discrepancy points to a significant untapped potential for non-cash contributions, an area that is ripe for exploration by forward-thinking nonprofits.
The impending wealth transfer from the Baby Boomer generation adds another layer of urgency to this scenario. As this generation enters retirement, we are witnessing the beginning of one of the largest wealth transfers in history, with estimates suggesting that around $84 trillion will change hands over the coming decades.[ii] A substantial portion of this wealth is expected to flow into charitable organizations, presenting an unprecedented opportunity for the nonprofit sector.
The implications of this wealth transfer are profound. Non-cash assets, often overlooked in traditional fundraising models, are now coming to the forefront. The transfer isn’t just about the volume of wealth changing hands; it’s about the forms that this wealth takes. For nonprofits, this means a shift in focus is needed. The days of primarily targeting cash donations are giving way to a more holistic approach, where non-cash assets become a key component of fundraising strategies.
By recognizing the potential of non-cash contributions, nonprofits can tap into a deeper well of resources, enabling them to expand their impact and reach. Moreover, we’re finding that tax implications are having an outsized influence on what these donors with non-cash assets plan to do. Donors are looking for tax-efficient ways to support their favorite causes.
We also predict that midlevel and major giving will increase as a percentage of income for nonprofits in 2024, mostly due to a decline in general giving. Your nonprofit organization should prepare for an increase in major giving. So you may see an increase in non-cash gifts as major giving produces more of your fundraising revenue.
Leveraging the Trend of Non-Cash Giving
As the trend of non-cash giving gains momentum, nonprofits are presented with a unique opportunity to tap into this substantial resource. By encouraging non-cash contributions, organizations can significantly enhance their fundraising capabilities. To effectively capitalize on this trend, nonprofits need to employ strategic measures aimed at both existing donors and potential contributors. Here’s how organizations can embrace and promote non-cash giving:
Educating Donors and Staff
Educating both donors and staff about non-cash giving is crucial. Launch comprehensive educational campaigns to inform donors about the benefits of non-cash giving, including potential tax advantages and the amplified impact of their contributions.
Kristin Hammett, Director of Nonprofit Success at The Signatry, explained, “While the opportunity to expand giving capacity with noncash assets is significant, many donors aren’t aware. A nonprofit leader or fundraiser can play a key role in facilitating generosity by educating donors. Sometimes all a leader needs to say is, ‘Did you know you may be able to give more and pay less in tax if you give before the sale?’”
Simultaneously, equip your team with the necessary knowledge and skills to manage non-cash donations effectively, covering aspects such as valuation, legal implications, and processing. Educate your team about how donors can fulfill non-cash gifts using their Donor Advised Funds (DAFs).
Tailoring Strategies to Donor Profiles
Tailoring your strategies to align with the financial landscapes and preferences of different donor profiles is key. For younger donors or those in earlier stages of wealth accumulation, focus on assets that might be more prevalent in their portfolios, such as stocks or mutual funds. For older donors, especially those considering estate planning, emphasize how non-cash giving can play a pivotal role in their legacy planning, offering tax benefits and potentially reducing the taxable value of their estates.
In 2022, 61% of contributions to donor-advised funds (DAFs) at Schwab were non-cash assets.[iii] Donors took advantage of eliminating capital gain taxes by giving non-cash assets to their DAFs. Be sure to communicate about DAFs and how donors can contribute to your organization using this popular charitable giving vehicle.
Facilitating Non-Cash Contributions
Facilitating non-cash contributions is equally important. Ensure that the process of making non-cash donations is straightforward and supported. Consider establishing partnerships with financial institutions or platforms that can facilitate the transfer of various assets, making the donation process seamless and convenient for donors.
If the donor is giving complex assets such as real estate or shares in a business, it’s vital to involve an expert like The Signatry (https://signatry.com) to help the donor maximize their donation.
Highlighting Non-Cash Giving Opportunities
Regularly highlighting the opportunities and impact of non-cash giving in your communications is vital. Feature stories and case studies that showcase the tangible difference non-cash contributions make. Create targeted campaigns during strategic times, such as the end of the fiscal year or during significant market events, to draw attention to the potential of non-cash giving.
Offering Recognition and Stewardship
Offering appropriate recognition and stewardship to donors who give non-cash assets is essential. Develop a comprehensive recognition program for your significant donors and include non-cash assets equal to cash gifts, and engage in ongoing stewardship activities. Kristin Hammett explained, “Donors who give non-cash assets are strategic, smart, or have advisors (and often all three!) These donors likely have capacity, regardless of the level they give at.” Keep non-cash donors informed about the impact of their gifts and maintain a relationship that acknowledges their unique contributions to your organization’s mission.
Consulting with Tax and Legal Professionals
Lastly, encourage donors to seek guidance from tax or financial advisors to understand the full scope of benefits and implications of their non-cash gifts. Ensure that your organization is also consulting with legal and financial experts to navigate the complexities of accepting, valuing, and acknowledging non-cash gifts properly.
“Nonprofits should know non-cash giving is complicated, but they don’t need to be the expert,” Kristin Hammett added. “They simply need to know there is an opportunity for expanded generosity and share that with the donor. When the donor expresses interest, the nonprofit can help connect the donor with an organization that specializes in this work. The Signatry, National Christian Foundation, or other Donor Advised Sponsors are good partners to work with donors and their advisors to assist in this generosity strategy.”
By embracing these strategies, nonprofits can effectively leverage the trend of non-cash giving. This not only diversifies the organization’s fundraising efforts but also aligns with the evolving preferences of donors, offering them a meaningful and tax-efficient way to contribute to the causes they care about. As we move further into 2024, the potential of non-cash giving is a frontier that all forward-thinking nonprofits should be prepared to explore.
[i]https://thesignatry.com/blog/cash-isnt-really-king-noncash-contributions/
[ii]https://www.kiplinger.com/retirement/how-to-keep-your-wealth-transfer-on-track
[iii]https://www.schwabcharitable.org/resource/fiscal-year-2022-giving-report
