By Patrick Kerney
Vice President of Player Benefits and NFL Legends Operations
Many of us get into the holiday spirit by giving both our time and our money to many worthy causes. While our time spent as ambassadors for our clubs and the NFL at various hospitals, soup kitchens, children’s homes, etc. is invaluable to those who receive it, our financial gifts are always welcome too. As many of us plan to be charitable well beyond our playing days, we need to look at how to maximize the positive effect we have on the charities and institutions to which our hard earned money goes.
As convenient as it may be to fill out a check and drop it in the mail, we aren’t optimizing our impact on those we are trying to help. There is a better way that keeps more money going towards worthy causes and less money going towards the governments who have already taken an enormous bite out of our money. It’s called “gifting appreciated stock.”
A lot of us trust the stocks of various companies to make our money grow. This is where we invest. One of the downsides of this growth is that when you cash in, the government makes you pay taxes on that growth. All active players are in the highest tax bracket and will have to pay a total of 23.8% on that growth so long as you’ve owned the stock for more than one year. You’ll owe a lot more if you’ve owned it for less than one year, but that is another story.
As an example, let’s say you took $100 of your money and bought one share of XYZ, Inc. in 2009. The stock market has been good since 2009, so let’s say this one share is now worth $200. Therefore the growth is $100 ($200 current value -$100 original value) and we would owe the government $23.80 (23.8% x $100 of growth). Instead of ever cashing out this stock, we can donate this stock to a charity or institution that is tax-exempt. Because of this tax-exempt status, the charity can cash in this stock and get to keep all $200!
A financial adviser may advise against this because he or she is convinced the stock market will continue to grow. It may also be that he or she doesn’t want to lose the commission they receive on this chunk of money you are donating. Either way, they can’t debate that this is the most tax-efficient way to put your financial assets to work for the greater good.
If you are interested in exploring options to gift appreciated stock, you should speak with a registered Certified Public Accountant (CPA). Following this discussion, you can issue an order to your financial advisor to move forward with the gift.