Most medical nonprofits are asking the same questions:
- Do we have enough assets and revenue to fund our mission? (According to The NonProfit Times, U.S. philanthropy in 2022 experienced a significant decline of $17 billion. Donors simply disappeared. The article offers insights into the reasons behind this decline and its impact on the nonprofit sector.)
- How effective is our current strategy for soliciting gifts and contributions?
- How can we maximize the giving potential of our donor base?
- Have we made our audience aware of every possible tax-efficient option for giving?
Here’s what happened when one organization asked MEDIQUS to help them address these questions.*
The Client
Founded more than a century ago, this international nonprofit operates a philanthropic foundation that provides educational and research opportunities for doctors, fellows, residents, and medical students to enhance their medical knowledge and technical skills.
Because the group’s foundation enjoys 501(c)(3) status, donors are able to make tax-exempt contributions to the organization’s various philanthropic initiatives.
The Problem
The group’s leadership was eager to explore ways to increase charitable donations from association members, other doctors, and past and present leadership.
Specifically, to complement a more strategic, comprehensive plan, they wanted to educate board members and members about other donation strategies available to them beyond simply “writing a check.”
An initial consultation with a separate institution’s charitable giving department yielded limited results.
However, because MEDIQUS was already providing institutional fund management services to the organization, the leadership reached out and asked if we might also be able to assist them with increasing awareness about charitable giving to their foundation.
The Solution
Because of our wealth management expertise in advising individuals about charitable giving strategies, we offered to help further educate the foundation’s board about a range of charitable giving options and help them communicate these options to their 1,500+ members.
We began with a concise, easily understandable educational presentation to the board. The emphasis was on different charitable giving mechanisms and their benefits.
We outlined the following options:
- Cash donations. This simple method consists of writing a check or using a credit card to make a charitable donation. We pointed out that while this is a common and convenient way to give, it generally is the least tax-effective giving strategy.
- Appreciated assets. This strategy involves giving appreciated assets, such as stocks, mutual funds, or exchange traded funds (ETFs)–held in a taxable account–to a specific charity.
This method of giving is more sophisticated and can provide additional tax benefits beyond a simple income tax deduction. For example, if someone owns stock initially purchased for $1,000 and now worth $10,000, they can donate that stock to a favorite charity.
The charitable deduction claimed by the donor would be based on the current market value of the stock ($10,000), not the original purchase price. The charity could then sell the stock, thus the donor avoids the capital gains tax that would have been incurred had they first sold the appreciated stock to make a cash contribution.
- Qualified Charitable Distributions (QCDs). This smart strategy is available to any IRA owner over age 70½. A QCD allows the direct transfer of up to $100,000 per taxpayer, per year from an IRA to a qualified charity. This distribution is not taxed–and the donor doesn’t need to itemize the deduction. IRA owners over age 73 can utilize a QCD as part of their Required Minimum Distribution (RMD) and support a favorite charitable cause while potentially reducing their taxable income.
- Donor Advised Funds (DAFs). With a DAF, a donor contributes assets (e.g., stocks) to the fund, and the market value of the assets becomes the deductible amount.
The DAF then sells those assets and reinvests the proceeds in a menu of investment options within the fund. The donor can then recommend grants from the fund to various charitable organizations.
This is a popular strategy for individuals with appreciated assets who want the flexibility to make gifts to multiple charities over several years. Donor-advised funds offer a structured approach to charitable giving while providing potential tax benefits (it’s important to note that administrative or investment fees may apply to DAFs).
- Other strategies. There are additional avenues for charitable giving–some of the strategies being more complex (e.g., trusts, charitable remainder trusts, charitable lead trusts, etc.). We explained to the board that these options often require specialized expertise and guidance from legal and tax professionals as well as financial advisors.
[DISCLAIMER: MEDIQUS is not a CPA and is not providing tax advice. You should speak with your CPA or tax preparer about your specific tax needs.]
The presentation primarily emphasized the benefits and tax advantages associated with each giving option.
To ensure wider dissemination of the information, a version of the presentation was recorded and turned into an “on-demand” webinar that the organization could post on its website. In this way, all its members were able to discover tax-efficient and creative ways to make charitable donations at a time most convenient for them.
The Outcome
The foundation’s board expressed deep appreciation for a clear and concise presentation that explained the often complex nature of charitable giving.
Even better, the organization immediately saw positive outcomes from its collaboration with our MEDIQUS team.
Soon after the presentation, one board member donated $150,000 worth of stock!
Since that time, the group has continued to develop current and planned donations through the various options (i.e. appreciated stock, DAFs, QCDs, etc.) mentioned above.
The organization hopes to build on this success by reaching out to past leadership and continuing to expand their pool of potential donors.
Lessons Learned
Our work with this nonprofit and its foundation powerfully illustrates:
- The wisdom of creating a tailored charitable giving strategy for your organization
- The benefit of offering giving options beyond traditional cash contributions
- The necessity of increasing engagement from existing members
- The importance of educating donors about alternative giving options (by simplifying complex concepts and providing concise educational resources)
While many institutional advisors may not provide consulting on charitable giving strategies, our expertise in wealth management lends itself to helping nonprofits maximize their fundraising potential.
Are you looking to refine your fundraising strategy and expand your donor base? We’d love to be a resource as you navigate the complexities of charitable giving and achieving your fundraising goals.
Schedule a consultation with MEDIQUS by clicking here.
*This case study is for illustrative purposes only. It is not a guarantee or indicator of future results. Results can differ substantially.
This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact MEDIQUS Asset Advisors, Inc. or consult with the professional advisor of their choosing.
