Gifts of Marketable Securities and Other Financial Assets

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Gifts of Marketable Securities and Other
Financial Assets
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Presenters

• Martin Hayter, Director, UCSD Office of Planned
  Giving
• Marlene Shaver, Assistant Vice Chancellor,
  Information Technology and Financial Systems

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Outline

• Character of a gift of marketable securities
• What tax advantages are there to these gifts?
• How are they handled and what policies and
  legalities apply?
• What about non-marketable securities?
• Questions

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What is the Character of A Gift of Marketable
Securities ?

• A gift of securities (or other non-cash financial
  assets) is a gift-in-kind. That is, not a
  cash gift, but a gift of a tangible asset that
  can be retained or sold.
• Gifts of securities can be made to either the UC
  Regents, or to the UC San Diego Foundation.
  Policies and outcomes are almost identical for
  either entity for these types of gifts.

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Tax Advantages

• A gift of marketable securities permits the donor
  to declare the fair market value of the stock, on
  the date of gift, as the donation value.
• The donor effectively transfers the appreciated
  asset, tax free, to the charity.
• The charity gets to sell the gift at FMV without
  the effect of capital gain taxation (tax exempt)
• Everyone wins, except the IRS!

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How are Gifts of Securities Handled?

• Required gift documentation
• Effective transfer of securities
• Sale and allocation of proceeds
• Gift Valuation and posting of the gift to
  Millennium
• IRS Reporting Requirements
• Receipting

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Required Gift Documentation

• Similar to any other gift, a donor letter is
  required which states that a gift of securities
  will be made, the exact securities to be gifted,
  how they will be transferred, and purpose of the
  gift, including any pledge payment applicability.
• Templates exist for both donor letters and
  brokerage/transfer agent instructions. Contact
  Planned Giving or UCSD Foundation

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SAMPLE DONOR LETTER

• Donor Name
• Address
• Date
• Address letter to Department, Dev Officer, PG, or
  Foundation
• Dear XX
• I/We wish to provide support to insert program
  or department name at the University of
  California, San Diego. I have instructed our
  broker, insert name, at insert brokerage firm
  name to irrevocably transfer insert number
  shares of insert name common stock to The
  Regents account at State Street Bank and Trust
  or The UC San Diego Foundation account at
  Merrill Lynch in accordance with the security
  delivery instructions provided to me/us. The
  date of the stock transfer is expected to be
  insert date.

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Donor letter continued

• The gift will be used to credit an existing
  pledge or create a new fund under the
  expenditure direction of insert name of chair of
  dept or researcher for the purpose of insert.
  I/We understand, in accordance with UCSD policy,
  that a one-time 4 administrative fee will be
  deducted from the gift proceeds.
• If a new gift for endowed purposes, gift letter
  should include endowment language and caveats
• Please issue a gift receipt for the stock
  donation to the address as noted above. If there
  are any questions about this gift, please call
  me/us at office phone.
• Sincerely,

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Transfer of Shares and Legalities

• Donors need to ensure that legal ownership of the
  security is effectively and properly transferred
  into the name of the charitable entity (UC
  Regents or UC San Diego Foundation).
• The charity MUST become the official owner of
  record of the stock in the corporate records.

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Transfer of Shares and Legalities(cont)

• Effective transfer is accomplished by
• Delivery of the securities via electronic DTC
  transfer from donors brokerage account to either
  The Regents or Foundation brokerage account.
  Date of gift is the date securities are received
  into our account.
• Delivery of properly endorsed stock certificates
  to either The Regents or the Foundation, with
  stock power. Donors should not endorse the back
  of stock certificates. Separate stock power
  forms should be used. Consult with Planned
  Giving or Gift Administration for proper
  handling. Date of gift is the postmark date for
  US Mail, or the delivery date if by Fed Ex or
  UPS.
• Re-issued stock certificate by transfer agent in
  the name of The Regents or the Foundation. Date
  of gift is the date of the reissued certificate.

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Sale and Allocation of Proceeds

• Policy Securities will be sold immediately at
  market.
• Proceeds, net of selling costs, are made
  available for the purpose for which the gift was
  given.

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Gift Valuation, Proceeds and Posting on Millennium

• Valuation of the security gift is the average of
  the high and the low price as published by the
  exchange on the date of the gift, times the
  number of shares given.
• Donor records reflect the VALUE of the gift as
  noted above. Pledges are reduced for that
  valuation.

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Gift Valuation, Proceeds and Posting on
Millennium (cont)

• Proceeds are HIGHLY LIKELY to be different than
  the valuation. The market changes second by
  second, and it is unlikely to sell a stock for
  exactly the average of the high and low of the
  day! Further, all sales have commissions and
  selling costs.

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IRS Requirements?

• For gifts of marketable securities, donor WILL
  NOT need an appraisal, but WILL have to submit an
  IRS 8283 form with tax return
• 8283 Form
• http//www.irs.gov/pub/irs-pdf/f8283.pdf
• 8283 Instructions
• http//www.irs.gov/pub/irs-pdf/i8283.pdf

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Receipting

• Gifts in kind, including gifts of marketable
  securities, are receipted only with a description
  of the gift. No values are provided. The words
  value as declared by donor appears in the
  amount section of the receipt.
• Donors are responsible for determining the value
  they will deduct on their tax returns.
• Donors are advised of how UCSD calculated the
  value of their securities gift in a separate
  letter sent out by Gift Administration.

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Gifts of Non-Marketable Securities

• Non-marketable securities may include
• Certificates subject to restrictive legends
• Non-publicly traded companies
• Contact Office of Planned Giving, as both
  situations are tricky! These gifts must be
  evaluated for acceptance and sale, and donors
  must be advised of valuation issues. IRS
  requirements for appraisals are often invoked.

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Questions?