How to accept stock donations: What nonprofits need to know
Successful nonprofits are investing more in stock fundraising. Stock gifts are typically much larger than cash gifts, and research shows that organizations that focus on non-cash gifts grow six times faster.
Accepting gifts of stock should be a top priority for your nonprofit’s development team because they can be particularly impactful. With the average stock donation worth $5,000, these contributions have the potential to be major gifts. They’re also one of the most tax-savvy ways for donors to give.
Stock gifts also often have the potential to become recurring donations, so you’ll want to ensure you start building relationships with these donors from the moment they say they’d like to make a donation of stock.
Once you’ve decided to invest in stock fundraising, how do you begin promoting this form of giving to donors? What are the logistics involved in accepting stock donations? This crash course will cover everything nonprofits need to know about accepting gifts of stock:
- Accepting stock donations FAQ
- The traditional way to accept stocks (and its shortcomings)
- How to accept stock donations: 8 recommended steps
- Stock giving in action
Accepting stock donations FAQ
First, let’s review some useful background information. For an even deeper dive into these questions and more, explore our complete introductory guide: Stock fundraising 101.
What types of stocks can be donated to nonprofits?
There are three types of stock that can be donated to nonprofits:
- Publicly-traded stocks: These are the most frequently donated non-cash assets because they’re widely owned and have publicly known prices.
- Privately-held stocks: These often have significantly higher values but require independent appraisals to determine their fair market dollar values.
- Mutual funds: These risk-mitigating bundled stocks are a popular option among everyday traders and investors.
What are the benefits of donating stock for donors?
There are a few key benefits that donors experience when donating stock to a nonprofit.
First, donating stock allows donors to avoid both capital gains and state income taxes that they would otherwise need to pay if they instead sold the stock to donate cash. Additionally, donors can claim a charitable deduction for the current fair market value of their stock at the time of donation. Together, these benefits can represent significant tax savings for donors.
Donating stock also exempts donors from the wash-sale rule, essentially allowing them to repurchase the stock for its current fair market value, reset their shares at a higher cost-basis, and maintain the composition of their portfolios.
What are the benefits of accepting stock for nonprofits?
First and foremost, the benefits and tax savings of donating stock frequently encourage donors to give what would be considered major gifts, perhaps for the first time. Gifts of stock are usually quite larger than cash gifts, and they represent a huge pool of potential donation revenue—the US Census estimates that 97-99% of wealth is held in non-cash assets.
Plus, donors are often more willing to give out of their wealth (i.e. from unearned gains on investments) than out of pocket (i.e. their disposable income). Encouraging gifts of stock can unlock generosity from donors who might otherwise feel hesitant to give a major gift.
Taken together, these benefits are powerful. Nonprofits that actively encourage and accept non-cash assets display revenue growth 66% higher than those that only accept gifts of cash.
What do nonprofits need in order to accept gifts of stock?
To accept stock donations as a normal part of your giving programs, your nonprofit needs:
- Team members to handle tracking, managing, and stewarding stock gifts
- A brokerage account to receive and process stock donations
- Marketing and communication collateral to promote stock giving and educate donors about the stock donation process
- A stock giving tool and CRM to record essential details and integrate stock donors into your normal stewardship processes
We’ll take a closer look at each of these essentials in the steps for accepting stock donations outlined below.
The traditional way to accept stocks
Traditionally, nonprofits accept donations of stock by following this general process:
- Publishing their DTC (Depository Trust Company) information and clearing number on their website for donors to use to initiate the transaction.
- Promoting stock giving and its benefits to donors and directing them to their published DTC information and instructions.
- Waiting to receive stock gifts via the donor’s and the organization’s brokerages.
How this method of accepting stocks holds you back
Although the process described above is straightforward for both parties, it’s a bit outdated and brings drawbacks that create undue risks and complexities for your organization.
For one, openly publishing your nonprofit’s DTC information with no kind of wall or lead capture in place can present a security risk, since financial information scraped online can fuel fraud.
Waiting to be notified of an already-completed stock transaction also makes your job of tracking gifts and thanking donors more difficult. Stock gifts that come in this way are usually reported anonymously, meaning you’ll be unable to thank stock donors or actively build relationships with them.
How to accept stock donations: 8 recommended steps
We recommend that nonprofits take a more proactive approach to learning about potential stock donors and use modern tools that make the process safer, more visible, and clearly trackable. This will ultimately generate more long-term value for your organization and provide a more engaging experience for donors. Let’s take a closer look at the steps involved:
1. Decide who will be in charge of tracking, recording, and acknowledging stock gifts.
Most organizations designate someone on their accounting or finance team to finalize the transfer of the gift from the brokerage. That person will typically then notify someone in development so they can record the gift and thank the donor.
As nonprofits vary in size, this process will come down to what makes the most sense for your organization and who will have the bandwidth to steward and follow up with donors.
2. Establish stock acceptance and investment policies.
Nonprofits also commonly develop stock acceptance and investment policies that specifically lay out the process and guidelines by which stocks will be accepted as donations and liquidated. This example policy covers all of the essentials, including timeframes for liquidation, regular account audits, and the status of stock proceeds as restricted or unrestricted.
Note that it is standard practice for nonprofits to implement a same-day liquidation policy for stocks received as donations in order to minimize the risk of loss of value.
3. Open a brokerage account and actively monitor it.
In order to receive transfers of stock, you’ll need to open a brokerage account.
Nonprofits usually get lower fees than companies or individuals. Research which brokerage firm is the most convenient for your organization and has the lowest fees — the most common are Schwab and Fidelity Charitable.
Make sure that the designated finance or accounting team member monitors this account daily for new stock donations so that received shares can be immediately valued for donors’ tax receipts. For privately-owned stock, the donor will need to get an appraisal by a broker before donating.
4. Create a stock giving page on your website and collect the right information.
Develop a central page on your website or a section of an existing “Ways to Give” page that explains why donors might choose to donate stock. Lay out the significant tax benefits that donors can receive, and show how their gifts of stock fuel your mission.
As mentioned above, it’s also recommended to collect donor information before encouraging them to directly initiate the transaction. This ensures you’ll be able to track the donation and attribute it to an individual for the purposes of stewardship and record keeping. Include a button or link on your stock giving page that directs readers to a form that collects this information:
- Contact information
- The type of shares they’re donating
- The date they plan to donate their stock
- Whether the value of the stock has increased and has been held for more than a year
Note: Donors can only receive a charitable tax deduction for the fair market value of their donated shares if they’ve owned them for more than a year. If they were held for less than a year, their deduction is instead limited to the cost-basis, or what they paid for the stock. If a donor is giving private stock, they will need to have the shares appraised by a broker or financial institution to determine the fair market value.
Once they complete the form, direct the donor to another page on your site or send an automatic email that contains your DTC information. Automate this process as much as possible—delayed response times can result in a lower number of completed gifts.
The FreeWill Stock Tool offers an easy way to streamline this process (or begin accepting stocks for the first time). Simply set up your stock donation landing page and information form, publish a link to it on your website, and encourage donors to use it to prepare their transfer documents. This system gives you real-time alerts when prospects initiate donations and full records of past and ongoing transactions.
5. Ask your donor to contact their broker and obtain a stock donation transfer form.
When you receive your donor’s contact information, immediately send them transfer instructions or include these on the page with your DTC information. These instructions should include:
- How to obtain a stock transfer form from their broker
- Your organization's brokerage name and address, and your DTC information to initiate the transfer
You may want to work directly with the donor at this stage to ensure they have included the right information for your organization to avoid any unnecessary delays.
Note: If your donor is transferring stock in a private company, this can also take longer (up to four weeks) than transferring publicly-traded stock. It may also raise valuation issues. If your donor is transferring private stock in November or December, make sure they are aware that it may take longer, and it’s possible that it might not be completed in time to be deducted from that year’s taxes.
6. Once received, sell the donated shares.
It’s best practice to sell the shares the same day you receive them. That way you won’t have an accounting discrepancy between the donated value and the actual cash proceeds. Once you’ve done this, you can transfer the cash from your brokerage account to your nonprofit.
7. Thank your donor and promptly send a tax receipt.
Receipts are required by the IRS for any donation of more than $250. Once the stock donation is listed in your brokerage account, send the donor a tax receipt that lists the date of transfer, the number of shares, and the stock’s ticker name.
This is a great opportunity to thank them again and assure them that their gift went through successfully.
8. Track and steward your stock donors.
Make sure you note the donor’s name, stock details, value of donation, and the date in your CRM so that you can effectively steward these major givers.
Remember that donations of stock have the potential to become recurring and quite valuable gifts, so stewardship is crucial. Continue sending out stewardship communications to keep these donors engaged, and encourage them to make another gift of stock—especially before the end of the year for tax filing purposes.
Stock giving in action
Here’s an example of a modern, safe stock giving process from Reasons to Believe. They created a dedicated page that explains the benefits of donating stock:
When donors click through, they’re taken to the organization’s FreeWill Stock Giving landing page and are offered a few options:
The first and most prominent option is initiating a stock gift, which will prompt the donor to provide contact and stock information.
The next option is to go straight to the organization’s transfer information if needed. This information is still important to share, but by not leading with it, the organization reduces the chances that a new donor will unknowingly give anonymously. The third option provides donors with additional resources that explain the benefits of donating stock.
Once a donor clicks through to begin a stock donation, they’re taken to a secure form that collects the most important information. This includes their name, name of broker, securities to be transferred, and the date of the donation.
Finally, after completing this form, the donor is directed to a page that provides them with the DTC information they’ll need to give their broker in order to request the stock transfer. In the meantime, the organization receives a notification of the incoming gift and full records for logistical and stewardship purposes.
By implementing this process, Reasons to Believe saw some impressive results—$554,000 raised through stock donations. Of this total, $490,000 came from a single gift of Apple shares. This is an excellent example of how accepting stock donations allows you to uncover new major gifts hiding in plain sight among your mid-level donor base.
How FreeWill’s Stock Giving Tool can help
FreeWill makes accepting stock donations easy and safe for both your nonprofit and your donors. We give you the online materials and forms you need to promote and accept gifts of stock, walk your donors through the process, and notify you when new gifts are initiated.
Learn more about our Stock Giving tool and reach out with any questions. We can’t wait to help you unlock transformative gifts to drive your mission forward.
If you want to learn more about non-cash giving, keep exploring with these resources from the FreeWill team:
- Planned giving: A complete guide to legacy giving programs
- Qualified Charitable Distributions: What nonprofits need to know about these tax-savvy gifts
- Cryptocurrency 101: What nonprofits need to know about fundraising these gifts
- DAFs 101: Everything your nonprofit needs to know about Donor Advised Funds