Taking Stock, Giving Stock

By Elizabeth Ü

Imagine that you’ve decided to align your investments with your values. You’ve gathered up all your financial statements, and identified the stocks, bonds, and/or mutual funds that don’t make the cut. You’re ready to divest, with the intention of freeing up that capital for more mission-aligned purposes. You call your financial advisor, broker, or parent to order the sale, and… you’re advised to hold onto some, if not all, of them, “for tax reasons.” Now what?

For many of us, this isn’t a hypothetical situation; it’s our current reality. It’s been years since I decided it would be easier to do nothing with those stocks and funds rather than argue the point, and so I  focused my impact investing efforts on other less contentious parts of my portfolio. So even though I’m a staunch supporter of locally-owned businesses, for example, I still own shares of big box stores through various mutual funds, and keep myself updated from websites like https://www.forex.academy on good stock rates.

Fortunately, I recently learned from my friend Eric Becker at Clean Yield Asset Management that I have much better options for my low-cost stocks, and one that has amazing potential to leverage social impact: donating them directly to nonprofits.

“If you’re going to be making charitable gifts, and you’ve been advised to avoid the capital gains taxes that you’d pay if you sold certain stocks, it’s a win-win situation to donate the ones you’d rather not hold on to,” he explained to me. “The charity that receives the stock can sell them without penalty, and you’ll receive a tax benefit for the value of the stock at the time of the transfer.”

In the event that the nonprofit you’re interested in supporting is not yet set up to receive gifts of stock, you can still ensure that they benefit while you clean up your investment portfolio. One less direct option that can save you time, especially if you plan to make donations to several organizations, is to donate the stock to an existing donor advised fund (if this is a way that you choose to give), and recommend grants to your chosen organizations through that fund. If you do not currently give through a donor advised fund, but would like to set one up, maybe this would be the year to do it! If you would like more information on RSF Donor Advised Funds, or if you already use one at RSF and would like details on stock transfers, contact Kelley Buhles by calling 415.561.6152 or by email at kelley.buhles@rsfsocialfinance.org.

A more direct option, and one that has potential for even longer-term benefits for that organization, would be to encourage – or even help – the nonprofit in question get set up to receive donations of stock. “All they need to do is set up a brokerage account,” Eric told me, “and that shouldn’t take more than an hour or two.”

Taking all this into account, I called my investment broker last Thursday, and he quickly identified for me which of the mutual funds in one of my accounts would be the most appropriate to donate. Then I called La Cocina, a nonprofit in San Francisco that I have chosen to support because of their excellent work fostering food entrepreneurship amongst women from culturally diverse and immigrant communities.

I asked La Cocina’s Executive Director Patricia Loya if she would prefer a year-end direct donation, a year-end donation of stock… or something different. She told me that they were not currently set up to take stock donations, but would look into it right away. She wasn’t kidding! When I called again just a day later, she said, “We’re so happy that people want to contribute to us in so many different ways, and we’ve already talked to a broker about setting up an account for us so that we can accept stock donations.”

All it took was a handful of phone calls! By the time this transaction is complete, I will have shaved a “non-aligned” mutual fund from my investment portfolio, made a donation to a cause that I believe in, and helped an organization set up a system that will, I hope, allow them to bring in even more donations over time. Now that’s cause for some holiday cheer!

Elizabeth Ü is Manager of Strategic Development at RSF Social Finance.

Imagine that you’ve decided to align your investments with your values…You call your financial advisor, broker, or parent to order the sale, and… you’re advised to hold onto some, if not all, of them, “for tax reasons.” Now what?

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