What Would A Charity Do With A Quarter Horse?



What would a charity do with a chain of adult bookstores, a collectible set of surfboards or an antique Army tank?


Sell them, of course, and use the money for whatever cause the charity supports.


How about the interest in an orange grove, a shipment of soybeans or a quarter horse? Same thing.


Those are only a few of the more unusual items that have been donated to charity by philanthropic individuals in the last few years. Known as complex (or noncash) assets, these can be donated just like traditional stocks and bonds to donor-advised funds, which convert them into cash for various charities, according to Eileen Heisman, CEO of the National Philanthropic Trust and the author of a recent report on these funds. The trust, based in Jenkintown, Pa., is an independent, public charity that provides philanthropic expertise to donors, foundations and financial institutions.


“We’ve gotten a coin collection, a Chinese dining room set, a Picasso painting and diamond jewelry, among other things,” Heisman says. “When it is something unusual like this, it is usually the financial advisor, rather than the donor, who calls us, and it is likely to be the advisor who suggested the donation to his client in the first place.”


When noncash assets are given to charity through a donor-advised fund, the donor is usually the one who hires an independent expert to assess the value of the gift, which the fund then approves. The fund then makes the arrangements for insuring the item; determines whether there are any legal restrictions involved in the conversion; makes sure there is an exit strategy for converting the asset to cash; and then sells the item to a legitimate buyer. The money is then put in the donor’s fund account and is available to be used for grants to the donor’s preferred charities.


The managers of donor-advised funds say the amount of noncash assets being given to them has either held steady or increased, but also say such assets always make up far more than half of the donations received. They represent 60% to 70% of the donations made to Schwab Charitable, a public charity and donor-advised fund, says Fred Kaynor, the fund’s managing director of marketing, business development and strategic partnerships.


“Many philanthropically minded people have long-held, highly appreciated assets, including publically traded equities, that they want to donate to their favorite charities,” Kaynor says. “By giving the assets to a charity through their DAF, they do not have to pay the capital gains tax, which they would have to pay if they sold the assets outright. That makes more money available to give to the charity.”


Donor-advised funds allow benefactors to put money in during years when it offers them tax advantages or when they have the money available from a business conversion or some other economic windfall. The money grows tax-free inside the fund, and it’s then available to give as grants to a particular charity, a disaster-relief cause or a charitable project.


“Donors see [them] as a reliable, resilient way to set money aside for their philanthropic interests,” Kaynor says. Donor-advised funds have also seen an increase in “unrestricted” gifts—when the donor gives the money to a charity without designating exactly what it’s for, Kaynor says, adding that Schwab Charitable has seen a 72% increase in these grants over the last year.


Most advisors asking about noncash assets want to know how they are valued, says Colby Bircher, vice president and charitable planning consultant at Fidelity Charitable, a donor-advised fund that has taken in $10 billion in noncash assets since 1991—$2 billion of that realized in the last year, which shows this type of giving is increasing in frequency. Overall, Fidelity donors distributed nearly $10.3 billion in grants during 2021, a 41% rise from the levels before the Covid-19 pandemic and a 13% increase from 2020. A full 64% of those grants were unrestricted.


“As donor-advised funds grow, they are increasingly vital as a sustaining force of funding for charitable organizations, particularly in periods of prolonged economic hardship, as they enable donors to contribute the right asset at the right time to make a difference for the future,” says Jacob Pruitt, Fidelity Charitable’s president, in his fund’s annual report. “Many of our contributions are noncash assets, which are then liquidated into funds for granting—a tax-efficient strategy many donors are embracing in a rapidly changing economy.”



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