Complex assets are non-cash assets like real estate, private company shares, artwork, or retirement accounts. These assets can be donated to offset taxable income, avoid capital gains taxes, and maximize charitable impact.
Why Donate Complex Assets?
Increased Charitable Impact
Larger or more meaningful gifts compared to cash donations.
Full value of the asset can support charitable causes.
Enhanced Tax Efficiency
Avoid capital gains taxes on appreciated assets.
Receive a substantial tax deduction for your gift.
Strategic Asset Management
Align investments with philanthropic goals.
Simplify portfolios by donating illiquid or hard-to-manage assets.
Categories of Complex Assets
1. Private Business Interests
When to Use: If you own shares in private companies, donating them helps avoid capital gains taxes before a sale or liquidation event.
Example: Shares of a family-owned business or startup.
2. Artwork and Collectibles
When to Use: Donate valuable art or collectibles to avoid capital gains taxes while supporting a cause.
Example: A rare painting or collectible item.
3. Real Estate
When to Use: Ideal for appreciated property, allowing significant tax deductions.
Example: Vacation homes or commercial properties.
4. Partnership Interests
When to Use: Contribute interests in partnerships or LLCs without needing to liquidate holdings.
Example: Real estate partnerships or investment funds.
5. Life Insurance Policies
When to Use: Donate a paid-up policy or name a charity as a beneficiary for immediate tax benefits and future charitable impact.
Example: Transferring ownership of a life insurance policy.
6. Retirement Assets
When to Use: Minimize estate taxes and use retirement accounts effectively for charitable purposes.
Example: Donating retirement account balances in an estate plan.
How Does It Work?
Identify the complex asset you wish to donate (e.g., real estate, stocks, art).
Transfer the asset to a Donor-Advised Fund (DAF).
Receive a tax deduction for the full value of the asset.
Avoid capital gains taxes on the appreciated asset.
Recommend charitable grants from the DAF to causes you support.
Case Studies
1. Ukraine’s Jewel
Betsy wanted to support Ukraine but faced a 24% capital gains tax on her emerald ring. By donating the ring to a Donor-Advised Fund, she avoided capital gains taxes, and the full auction value supported relief efforts.
2. A Legacy Preserved
The estate of music legend Arthur “Skip” Maggiora needed $4.8MM for charity but had limited liquidity. By donating his $1.8MM guitar collection to a DAF, his estate avoided IRS challenges, honored his legacy, and supported charity.
3. SPAC Stock Saves $360,000 in Taxes
Lindsey’s tech startup went public as a SPAC. By donating $18MM in stock to a DAF, she avoided $360,000 in capital gains taxes and secured a charitable deduction, with proceeds funding local charities.
FAQs
What Are the Tax Benefits of Donating Complex Assets?
Avoid capital gains taxes.
Receive an immediate charitable deduction.
Reduce estate taxes (for assets like real estate and retirement accounts).
How Can I Start Donating Complex Assets?
Work with a financial advisor to identify eligible assets.
Open a Donor-Advised Fund (DAF).
Transfer the asset to the DAF for immediate tax benefits.
Can I Donate Illiquid Assets?
Yes, assets like private business interests, partnership interests, and collectibles can be donated. Specialized expertise ensures proper valuation and compliance.