Want To Provide Deeper Value? Look At A Multiyear Plan
Because the shares vesting this year might not be the most tax-advantageous assets to donate, you don’t need to take advantage of this strategy right away. Instead, this opportunity can be a conversation starter, allowing your client to consider the approach throughout the year. Together, you can identify the right time to make a charitable contribution of other highly appreciated assets in their portfolio. If made anytime this year, the gift will still offset the impact of the vesting shares and help them rebalance their portfolio to address concentration concerns. Knowing that next year’s awards may vest around the same time, you can develop a multiyear plan aligned with your client’s charitable intent that will keep providing value in years to come.
Once you and your client select the right assets and timing, consider a donor-advised fund to carry out their strategic charitable plan. Whether it’s one share or a block of stock, your client can separate the timing of their deduction from the delivery of the gift, readily deploying charitable dollars when they’re needed most and investing their balance tax-free in the meantime.
Executives And Key Employees May Have Additional Timing Considerations
Most public companies have insider trading policies, which restrict transactions of company stock. Depending on the company, these restrictions can apply to a wide swath of “key employees” as well as C-suite executives. For these clients, companies impose closed trading periods during which trading activity is restricted. While employees are prohibited from buying or selling during a closed window, it may still be possible to gift stock to charity. This decision will be determined by issuer’s counsel—and the charity may be asked to adhere to the trading policy, in which case an independent appraisal may be required. In addition, many executives are now interested in including a charitable giving element to their 10b5-1 trading plans.
A sophisticated charity can become a trusted partner and work with company counsel to help executives and employees—your clients—make the most of their giving strategy.
No matter how you approach it, equity compensation shouldn’t be an afterthought, or simply “the icing on the cake.” Proactively discussing tax-efficient strategies including charitable giving with the best asset can help your clients feel confident about meeting their financial and philanthropic goals—demonstrating the unique value you bring to the table.
Amy M. Grossman, J.D., is vice president of the Complex Asset Group at Fidelity Charitable, where she works directly with donors, their advisors, and corporate and business lawyers to make the most of their charitable contributions.