Major gifts of stock: Your ultimate guide to making effective fundraising appeals

Magda Cychowski
January 29, 2021
min read
Major gifts of stock: Your ultimate guide to making effective fundraising appeals

More and more nonprofit donors are making stock gifts, and stocks are becoming a source of major fundraising growth for nonprofits. In fact, organizations that accept non-cash assets grow six times faster than those that only accept cash — regardless of their sector or size.

In this guide, you’ll learn:

  • Common terms around stock giving that may come up in donor conversations
  • Who you should target for stock gift appeals and why
  • Tips for effective donor conversations about giving stock
  • How to answer common donor questions about stock donations

How to define common stock gift terms for first-time donors

Put simply, stock gifts are donations of shares of stock that your donor owns in a public company, private company, or mutual fund. And stock giving is not only for your more financially-savvy supporters. According to Fidelity Charitable, over 80% of donors have appreciated assets, but only 21% have given them to charity. Although these major gifts are one of the most tax-savvy ways to give, they can seem complicated and confusing for first-time donors. This is why donor education and awareness is vital for acquiring more stock gifts.

As you explain the stock donation process, here’s how you can simplify the most common financial terms around stocks for your less financially-savvy donors, and educate them about stock giving in the process:

  1. Publicly-traded stocks: These are stocks sold on the public stock exchange. Most of your potential stock donors will own publicly-traded shares of stock.

    What you can say: “Most of our supporters give shares of stock that you can buy on the stock market — like shares of Google or Apple. Donating these is simple because we always know how much they're worth. All you have to do is look at their latest price on the stock market.”

  2. Mutual funds or exchange-traded funds: These are a large pool, or portfolio, of stocks that individual or small investors can invest in, as opposed to purchasing a single stock on their own.

    What you can say:  “If you have money in a mutual fund or ETF, you can donate a portion of that, say $500 from the Fidelity 500 Index Fund. It's just like giving whole shares in a single company.”

  3. Privately-held assets: Donors that own shares in a company that is not “publicly traded” (e.g. LLC, C Corp, S Corp) can still donate private stock. These stocks do not have a publicly known price, and  need to be appraised by a broker before they can be donated.

    What you can say: “If you want to give private stock, the process is simple. You’ll just need to have your shares valued by a broker before we can begin.”

  4. Capital gains tax: When a donor gives stock that has gone up in value (or appreciated) instead of selling it, they do not have to pay capital gains tax. A capital gain amount is the current price of the share minus the price that was paid for it.

    What you can say: “This might come as a surprise, but by donating stock you don’t have to pay capital gains tax. A capital gain is the difference in the price you paid for your shares and the price they’re valued at now. For example, if you bought Apple shares for $100 a share, and they’re now valued at $500 a share, then you’d be taxed on the $400 you made if you sold it. But by donating it, you’ll save on those taxes. If you tell me what kind of shares you have and what you bought them at, I can quickly calculate how much you might save.”

  5. Fair market value: The current value of your donor’s stock.

    How it might be used: “What is the fair market value, or current price, of the stock you’d like to donate?”

  6. Cost-basis: The original price your donor paid for their shares.

    How it might be used: “Do you know the cost-basis of your shares? That’s how much you paid for them originally. If they’ve gone up in value, we can figure out how much you’d save on taxes together.”

Targeting appeals: Older donors & Millennials are your best stock donation prospects

To ask for stock donations, you’ll first need to know who your ideal prospects are. Your largest gifts will generally come from wealthy older donors since they will be more likely to own appreciated stocks.

However, you shouldn’t ignore your Millennial supporters. Here’s why: over the next 25 years, an estimated $68 trillion will be passed on as the large and wealthy Baby Boomer generation passes away. This will be the largest wealth transfer in human history and Millennials are poised to inherit many of their Boomer parents’ appreciated assets. And, when a younger donor inherits stock, it’s automatically considered a long-term asset, meaning they can donate immediately, and avoid capital gains taxes.

Additionally, Millennials are beginning to heavily invest in stocks. In 2020, Millennials accounted for nearly 20% of the stock market’s trades — up almost 5% from 2019. And with strong stock growth over the past decade, they’ll be ideal prospects for donations of appreciated stock. With decades of giving years ahead of them, getting a $10,000 gift from a Millennial will be worth much more than getting a $10,000 gift from a Boomer.

7 tips for talking to donors about major gifts of stock

In addition to defining terms that may be new to your donors, here are six tips on speaking about stocks that will ensure you’ll have effective one-on-one conversations with your prospects.

1. Use social proof to encourage other donors to give stock.

Social proof is the concept that people want to behave in ways that are similar to their peers. When having a conversation with a potential stock donor, note that other donors like them have decided to leave gifts of stock. By making donors curious about what other tax-savvy supporters are doing, you can educate them about stock gifts without pressuring them to make an immediate decision.

If your donor owned shares of Apple, you might say: “I thought about you because another longtime donor, also from California, recently donated Apple shares and saved a lot of money on her taxes. Would you be interested in learning more about that?”  

2. Acknowledge that this form of giving might be surprising to them.

When asking donors to think differently about charitable donations, it’s important to recognize that new ways of giving might be surprising to them. This can lower any defensiveness they may feel towards more financially-savvy forms of giving, and open their mind to new possibilities.

For example, if you started the conversation by saying “donating your Apple shares is much better for you and for us,” that can make a donor feel like they’ve done something wrong by not considering this option before.

Instead, change the framing to: “That other donor was also surprised by how easy and beneficial that gift of stock was for them and the impact they wanted to have.” This acknowledges that stock giving might be new territory, but also makes it clear that you want their donation to benefit their wallet as well as your organization.

3. Avoid complex language.

As stated earlier, stock giving can seem daunting to donors who have never given in this way before. In your conversations, try to avoid using technical terminology about stock giving.

Being simple and concise will always be more effective, and will make this type of major giving seem accessible to more of your donors.

4. Lead with tax savings.

When giving stock, donors avoid paying capital gains taxes, and can take a charitable deduction for the current value of their shares. This can result in tax savings of up to 70%, making their gift more valuable at no added cost to them. And 50% of donors show more interest when you say “receive a tax deduction and make a gift,” compared to just “make a gift of stock.” By showing the donor that the gift is mutually beneficial for them and your organization, it’ll drive further incentive to give.

5. Let donors know how this helps with all of their giving.

Your donors probably give to more than one nonprofit. The more a donor gives stocks to any organization, the more frequently they may think about giving to you. That’s why it’s important to remind donors that this type of major gift won’t only make a huge impact for you, but for “all of their giving.” By sharing how to make effective gifts of stock to nonprofits like yours, you will build trust with donors by keeping their charitable interests in mind and educating them on smarter ways to donate.

For example: “Marc, I hope this is helpful to you for any of your giving, to our organization or elsewhere. This can help you save money and have a bigger impact on the causes you care about.”

6. Frame your appeal as an event that only comes around once a year.

Framing a donation as an exceptional event can significantly drive charitable giving. For example, if you regularly use language like “make an annual gift,” it will be more effective to change this to “make a gift only once a year.” In doing so, the donor removes their gift from comparison with other “regular” disposable income budget items, and may make a larger gift than they would otherwise.

7. Use a capital gains tax calculator.

You may want to use an online capital gains tax calculator (like this comprehensive tool) to speak specifically to your donor’s tax savings and giving options. By doing the math and providing your donor with the estimated amount of savings they’ll see, you can clearly show them the larger impact their gift could have at your organization.

Bonus tip: Don’t call Millennial donors — text or email them.

Millennials are much less likely to answer phone calls, especially if it’s a number they don’t recognize. However, since it’s unlikely that they’ll donate the first time they hear about an organization, you should still communicate with them through multiple touchpoints. And the most effective channels are text and email.

Text message appeals have a nearly 100% open rate among Millennial donors, making it an effective tool to jumpstart a conversation about stock giving, or lead them to your stock donation page on your website. Meanwhile, email accounts for almost one-third of all online donations, and over 75% of Millennials prefer to give online when they donate. If your organization wants to reach Millennials about stock giving, these are the best channels to start connecting on.

FAQs about stocks & how to answer your donors

Q: How do I save on taxes by donating stock?

A: First, if you’ve owned your stock for more than a year and it’s gone up in value, you’ll avoid paying a capital gains tax. A capital gain is the difference in the price you paid for your shares and the price they’re valued at now. For example, if you donate Apple shares worth $500 and they were $100 when you bought them, you’d have a capital gain of $400. When you donate, you wouldn’t have to pay taxes on that $400, making your gift more valuable at no cost to you. Plus, you can take a charitable deduction for the current value of the stock, saving you even more when you file taxes this year.

Q: The stock market is going up, but it’s been a tumultuous year. Is it still a good time to donate stocks?

A: Yes, and now might be the best time to donate stocks. Even if the market is a bit up and down, trends can change at any moment. Donating stocks today ensures you can take advantage of these highs, and make a much larger impact.

Q: I’m convinced that donating stock is a great way to give, but I don’t want to lose my holdings.

A: After donating stock, you can buy the same stock again within the day. This means that your portfolio won’t change, you’ll reset your cost-basis for the shares, and still make a really impactful gift.

Q: If I want to write off this year’s gift on my tax return, when should I donate?

A: It’s important to make sure you give a stock that’s going up in value, so keep an eye on the stock market. However, for your gift to be eligible for this tax year, you’d need to transfer your stocks by December 31st.