Has your nonprofit accepted gifts of stock? If not, perhaps donors have mentioned the possibility of giving stock, or you’ve heard about stock giving programs from peers in other organizations. Maybe you’ve never considered soliciting stock from donors but want to learn more.
Organizations of all sizes are increasingly devoting more time and energy to forms of giving beyond straightforward one-time or pledged cash donations, like non-cash gifts of securities and appreciated assets or more complex planned gifts. There can be a lot of value in diversifying your revenue streams in this way, especially in today’s turbulent economy.
Stock giving in particular brings a considerable set of unique benefits to the table. It’s also easier to begin pursuing and accepting gifts of stock than you might initially assume if it’s a new undertaking for your nonprofit.
What do you need to know to get your bearings and start accepting gifts of stock?
Stock Donation FAQs
Let’s review the most immediate questions you might have about stock giving:
What kinds of stock can be donated?
The stock of publicly traded companies is most commonly donated to nonprofit organizations. Shares of mutual funds can also be easily donated.
Private stock can also be donated and often bring higher values, although the process involves a few extra steps. Since the price of these stocks is not publicly known, they require an independent appraisal to determine fair market values for liquidation and tax purposes.
Why would donors give stock instead of cash?
Donors see benefits from donating stock that could be quite motivating:
- By donating the stock rather than selling it, donors avoid paying capital gains taxes on its appreciated value.
- Donors can also claim a tax deduction for the fair market value of donated stock.
- Donating stock exempts donors from wash-sale rules, essentially making it easier to repurchase the same company’s stock at a higher cost basis, thereby reducing capital gains taxes on future sales.
Practically speaking, donating stock could also simply be more convenient than giving cash for some donors. Others might appreciate the ability to give to a cause they care about while rebalancing or restructuring their investment portfolios. In some cases, an emotional connection might even come into play, for instance, if the stock was inherited from a loved one who was a passionate supporter of your organization.
Why should nonprofits accept stock donations?
What are the benefits that nonprofits can see from soliciting and accepting stock from donors? As a new revenue stream, stock fundraising stands out because:
- It often generates large gifts. The average stock donation is worth $5,000 and is often the equivalent of a mid-size or major gift for many nonprofits.
- You keep all the proceeds. In most cases, your nonprofit won’t pay capital gains tax on income generated from liquidating your donated stock, which is the generally accepted best practice. If you do hold onto stock, you will most likely be exempt from taxes on its dividend payments.
- Stock giving is often easier to pitch than gifts of cash. Since giving out of non-cash assets doesn’t affect a donor’s day-to-day spending power, it can change their generosity mindset and ultimately encourage them to be more charitable.
- It opens up new giving opportunities. 80% of high-net-worth donors own appreciated assets, but only 21% have given non-cash gifts to charity before, perhaps because they aren’t aware of their options or because they’ve simply never been asked. Other donors could also own stocks they’d be willing to donate but haven’t yet been on your radar as top prospects.
Not to mention, creating new and potentially more convenient ways to give simply increases the odds you’ll see new gifts come through. If you open up this new opportunity for donors, you’ll just need to actively support it with an organized, intentional process in order to start seeing these benefits.
How to Accept Stock Donations
Here are the recommended steps for accepting stock donations as part of a dedicated giving program:
- Assign program ownership and establish policies. A development team member should oversee the donor-facing side of your stock giving program, and someone on your accounting or finance team should own the internal reporting process. Establish stock acceptance and investment policies to start off on the right foot, including a same-day liquidation policy.
- Open a brokerage account. Do some research to find the best fit (and lowest fees) for your organization, then ensure that your accounting or finance lead actively monitors the account each day to identify new stock donations so that they can be valued and acknowledged.
- Create web assets and data collection forms. A stock giving web page, other promotional and educational materials, and a dedicated form for donors to initiate the transaction are essential. We’ll discuss the importance of taking an active approach to facilitate stock donations below.
- Explain the steps your donor should take. Once a donor initiates a stock gift, immediately direct them to instructions for setting up the transfer. They’ll need to obtain the right form from their broker and provide your organization’s brokerage and DTC (Depository Trust Company) information. If a donor is gifting private stock, you’ll need to take a more hands-on approach so that it can be appraised and handled properly.
- Sell your received shares. It’s a best practice to liquidate stock on the same day it’s received to minimize any loss of value and prevent tricky accounting discrepancies. Once sold, transfer the proceeds out of your brokerage account.
- Send a receipt. Receipts are required for any donation over $250, and tax benefits are likely a big motivator for your stock donors, so acknowledge new gifts as quickly as possible. Thank them and provide clear documentation of the transfer date, number of shares, and stock name.
- Thank and steward your donor. By collecting stock donor information upfront, you now have everything you need to thank and steward them like a typical major donor. Funnel them into your normal stewardship cadences to keep them engaged and primed to give to your mission again.
For a more detailed look at each of these steps and a real-life example of the donor-facing stock giving process, explore the FreeWill guide to accepting gifts of stock.
Succeeding with Stock Giving: Key Reminders
What are the most important tips to keep in mind as you launch a stock giving program?
Take an active approach before, during, and after the gift.
As mentioned above, you should actively promote your program and collect stock donor information at the start of the donation process. This is in contrast to the historical or more typical process that many nonprofits follow, in which they publish their DTC information online and simply wait to receive stock gifts via their brokers.
The drawback of this more passive approach is that gifts facilitated through brokerages are usually reported anonymously—meaning if a donor hadn’t already notified you of their intention to give stock, you’d have no way of knowing who they are, how to get in touch with them, or how to thank them.
Instead, you should collect this information upfront:
- Donor contact information
- Type of shares to be donated (public, private, mutual fund)
- The intended date of the donation
- Whether the stock’s value has appreciated and has been held for more than a year
(Note that donors can only receive a tax deduction for the stock’s fair market value if they’ve held it for longer than a year. If not, donors can instead deduct the stock’s cost basis.)
By proactively gathering this information, you’ll have everything you need to create a stellar donor experience. Your stock giving tool should notify you first of incoming form completions and then whenever a donor reaches the point of requesting your DTC information to begin the transfer. This allows you to jump right in, offer initial thanks, and generally be available to discuss the gift or answer questions.
Once the gift is complete, actively follow up and steward your relationship with the donor. Develop your own unique cadence that will express your gratitude and encourage future engagement, like this example:
- Send an initial thank-you, receipt, and impact statement
- Follow-up via email to reiterate the impact of the gift
- Conduct wealth screening/prospect research to learn more about the donor, then sort them into an appropriate development segment
- Regularly reach back out to invite the donors to events, volunteer, etc.
- For high-value segments, set up a one-on-one meeting or call to re-express gratitude and discuss future giving options
Effective stewardship relies on ongoing and regular communication. Depending on how your new stock donors fit into your segmentation or development strategy, this could mean automated or highly personal communication. Either approach can work to boost engagement, but the key is being active and consistent
Aim to be helpful at every step of the process.
Donating stock may be brand new to your donors. As you promote your program and work with donors to facilitate gifts, position your organization as a helpful and grateful partner. Don’t take it for granted that they already understand the ins and outs of the process.
We recommend building out a library of promotional materials to help educate donors. They might include:
- A dedicated web page
- Email streams
- Social media templates
- Digital and printed one-pagers
- A new section in your annual report or newsletters
- Phone scripts
Across these materials, you should explain the tax benefits of stock giving, how the process works, what they’ll need to do, and why and how stock giving benefits your mission.
Keep in mind that you should avoid giving or implying that you’re giving financial advice any time you promote non-cash donations, including stocks, crypto, property, and more. Direct your donors to their financial/investment advisors for official guidance and answers as needed.
Using the right tools and taking the right approach makes all the difference when expanding into a new form of giving. Stock giving was previously treated as a kind of black box that spat out gifts but offered little visibility. But remember that a modern, active approach generates more value—not just in terms of the gifts themselves but also increased control over the process and the ability to directly connect with and steward your non-cash donors.
Ready to start building your stock giving program? Begin by laying out its guidelines, ownership, and processes, then create a dedicated form or use a stock giving tool to ensure you’ll have all the information you need to maximize your new revenue stream’s long-term value.
About the Author
Patrick Schmitt, Co-CEO of FreeWill
Patrick Schmitt and fellow FreeWill co-CEO Jenny Xia founded at Stanford University’s Graduate School of Business in 2016. FreeWill’s charitable giving platform makes it easier for nonprofit fundraising teams to unlock transformational gifts, and to date has generated over $6.6 billion in new gift commitments for thousands of nonprofit organizations. Patrick hosts FreeWill’s popular webinar series, educating thousands of nonprofit fundraising professionals each month about planned and non-cash giving strategies.
Before FreeWill, Patrick was the Head of Innovation at Change.org, where he helped grow the organization to 100 million users in four years. Prior to that, he ran email marketing for President Obama and served as Campaign Director for MoveOn.org.