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Featured Article on WealthManagement.com: Gifting Complex Assets

A simple approach to helping clients maximize charitable impact and reduce taxable income.


In this article, Randy discusses The National Philanthropic Trust's report indicates that 61% of recent contributions to donor-advised funds (DAFs) were made using complex assets instead of cash, a trend likely to grow due to economic uncertainties and market fluctuations. Complex assets encompass non-cash items like privately held company shares, real estate, hedge funds, venture capital, and digital currencies. High-net-worth families often possess such assets and commonly choose real estate and privately-held business interests for donation. However, many charities lack the capacity to manage complex assets effectively, resulting in missed opportunities for donors and charities alike. To address this, a three-step approach is recommended. Firstly, donors should consult with targeted charities and consider conduit charities like DAFs and community foundations, which possess the expertise to evaluate and process complex asset gifts. Secondly, careful due diligence is crucial, encompassing understanding the asset's complexity, timing, tax implications, restrictions, and legal issues. Lastly, donors should ensure the smooth acceptance of the asset by both parties through a well-defined agreement that assigns ownership and outlines necessary terms, with an independent qualified appraisal required for income tax purposes.

Regarding real estate donations, benefits include income tax deductions based on the property's market value, avoidance of capital gains taxes, and the potential for a lasting legacy. For substantial donations exceeding $5,000 in value, donors need a qualified appraisal and must be prepared to complete Form 8283. Donors are advised to transfer real estate through a limited liability company (LLC) to minimize liability and collaborate with charities for a mutually agreeable transfer strategy. A real-world example illustrates how a successful business owner can save substantial taxes through structured complex asset donations, particularly involving personal goodwill portions.


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