If you’re like many advisors, you may have discovered that often charitable giving conversations begin (and end!) with cash or appreciated stock. And of course, you are well aware that appreciated stock is an excellent choice for your clients to fund a donor-advised or other type of fund at the community foundation because it may avoid capital gains tax while also possibly triggering eligibility for a charitable deduction at fair market value.
But for some clients—especially business owners, collectors, and affluent retirees—valuable assets may take a different form entirely. Boats, airplanes, cars, RVs, and other tangible property can represent a mixed bag of characteristics: significant wealth, ongoing maintenance costs, and emotional attachment, all of which may add up to a charitable giving opportunity. These situations may no longer be one-off cases. Classic cars are a notable example, with some estimates tallying the total at more than 43 million vehicles in the United States alone—an estimated $1 trillion in total insurable value!
Here are four tips to consider as you work with your charitable clients.
Always reach out to the Community Foundation
Anytime you’re dealing with a charitable client, please reach out to the Williamsburg Community Foundation to explore your client’s options. Your clients may be surprised to learn that public charities, such as the community foundation, can accept a wide range of noncash assets, provided the assets can be evaluated, valued, transferred, and ultimately liquidated to support your clients’ charitable goals.
Ask questions beyond balance sheet basics
Clients may forget to mention that they own highly appreciated noncash assets. As clients prepare to meet with you, they are often so focused on gathering investment statements and real estate information that they forget about classic cars, RVs, planes, and boats! Comprehensive conversations are especially timely as many affluent households continue to hold substantial wealth outside of traditional investment portfolios. Recreational assets purchased years ago may now hold significant value while also generating ongoing expenses, storage concerns, and succession-planning questions. Clients who are downsizing or simplifying during retirement may welcome charitable strategies that transform underused assets into community impact.
Build your client’s charitable plan prior to a sale
When you spot unusual assets on a client’s balance sheet, and you know your client is charitable, it’s important to consider the possibilities. A client preparing to sell a classic car or boat, for example, could incur significant capital gains tax if the asset has appreciated in value. Contributing the asset to a fund at the community foundation before a sale may help reduce or eliminate those taxes while also generating funds to support charitable causes the client cares about.
Pay attention to the rules
Gifts of noncash assets require careful coordination. Unlike publicly traded securities, these assets involve additional due diligence. Title transfers, appraisals, environmental reviews for real estate, insurance considerations, debt obligations, marketability, and liquidation logistics all require attention. The IRS also imposes specific substantiation and reporting requirements for charitable deductions involving noncash gifts.
We are always happy to work alongside you and clients’ other attorneys, CPAs, valuation experts, and financial advisors to determine whether proposed gifts are feasible and which structures might be best. In many cases, we can accept the asset and facilitate its sale.
While this blog comes from WCF, the research and writing come from a national partner that supports community foundations like ours with expert content. It is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.