In-Kind Donations Explained — With Examples
When we think about donating to charity, we often think of a gift of cash. But there are a variety of ways to give, and an in-kind donation is one of them.
An in-kind donation, also known as a gift-in-kind, is usually a specific non-cash asset that is contributed to a charitable organization for which the donor may receive a donation receipt.
A gift-in-kind can be made in the form of an asset or property that has real value and is not a gift of cash. The most common gifts-in-kind tend to be gifts of publicly listed financial securities such as stock, bonds, mutual and segregated funds, hedge funds or gifts of real property.
To help donors and their financial advisors have meaningful conversations about in-kind donations, this article outlines some examples of in-kind donations and a few tips when making a gift of this kind.
Examples of in-kind donations
Real estate: In-kind donations may include gifts of real estate such as a primary residence, a second home, or time-shares. As well, vacant land and residential income, and commercial or industrial properties may also be considered when making an in-kind donation.
Art and valuables: Donors may also choose to gift valuable assets such as precious gems, antiques or even metals. Vehicles such as automobiles and yachts or equity memberships with resale provisions and shares in privately held companies, or qualified restricted, controlled or lockup stock and may be accepted as an in-kind donation. In effect, most any form of professionally appraisable items or assets of real value.
Financial securities- Publicly traded investment securities, such as stocks, bonds, mutual funds and segregated funds, have special rules that effectively eliminate any capital gains tax that the donor may otherwise have to pay. Generally, a donor could pay as much as 50% of the appreciated value of the financial asset in capital gains tax. But if the donor chooses to make a gift of securities to a charity, they will receive a donation receipt for the fair market value of the asset and will incur no capital gains tax on the gifted asset.
Whether giving property, financial securities or another valuable asset instead of cash, both the donor and the charitable organization can benefit. The key to a successful in-kind donation is aligning the gifted property with the needs of the charitable organization to ensure the gift is both useful in supporting the charity’s work and in alignment with the donor’s philanthropic goals.
How a Donor Advised Fund can help
Not all charitable organizations are able to accept all types of gifts—especially some assets which may include special items, like works of art or antiques, or other complicated gifts which can be more challenging for smaller charitable organizations to handle.
In this case, both the donor and the charity may benefit from setting up a Donor Advised Fund (DAF). Gift Funds Canada helps financial advisors set their clients up with a DAF and can provide extensive experience handling complex in-kind donations. By connecting donors and their financial advisors to an objective, third-party, formal valuation, an immediate donation receipt can be provided to the donor.
This approach ensures the asset is appraised at fair market value, enables the donor’s preferred charity to receive cash funding as a result of their gift setting up a DAF and, with a monetization plan in place, may extend time for the disposal of the asset in question.
And, with a Gift Funds Canada donor advised fund, the donor can work with the financial advisors they choose to manage the funds in the DAF, as well as advising on how much gets distributed to their preferred causes and when.
Ready to learn more? Here’s how to leverage in-kind gifts as a giving strategy.