Gift of Appreciated Securities

Stocks, mutual funds, and bonds that have increased in value and been held for more than one year are one of the most popular assets to use when making a gift to Northwestern. Making a gift of stocks, mutual funds, or bonds to Northwestern offers you the chance to support the University while realizing important benefits for yourself.

When you give appreciated securities you have held more than one year to Northwestern, you can reduce or even eliminate federal capital gains taxes on the transfer. You may also be entitled to a federal income tax charitable deduction based on the fair market value of the securities at the time of the transfer. If you would like to make a gift of securities to Northwestern, please click here for transfer instructions.

Securities that have decreased in value do not make tax-advantaged gifts. Consider selling the security, claiming the capital loss deduction, and giving the proceeds as a gift to Northwestern.

Securities are most often used to support the University in the form of:

• An outright gift. When you donate securities to Northwestern, you receive the same income tax savings that you would if you wrote the University a check, but with the added benefit of eliminating capital gains taxes on the transfer, which can be as high as 20 percent. Making a gift of securities to support the University is as easy as instructing your broker to transfer the shares or, if you have the physical securities, hand-delivering or mailing the certificates along with a stock power to Northwestern in separate envelopes. (Using separate envelopes safeguards your gift—the certificates will not be negotiable without the stock power.)
• A transfer on death (TOD) account. By placing a TOD* designation on your brokerage or investment account, that account will be paid over to one or more persons or charities after your lifetime. It is not necessary for the TOD designation to transfer all of the account solely to charity—you can designate a certain percentage of the account. With a TOD account, the beneficiary you name has no rights to the funds until after your lifetime. Until that time, you are free to use the money in the brokerage account, to change the beneficiary or to close the account.
• A gift in your will or living trust. If you aren’t ready to give up these assets during your lifetime, a gift of securities through your will or living trust allows you the flexibility to change your mind at any time. You can continue to receive dividends and participate in shareholder votes, and the securities are still yours if you need them for other expenses. Use our sample gift language to ensure that your support for Northwestern continues after your lifetime.
• A donor-advised fund. When you contribute to a donor-advised fund with appreciated securities, you may receive a federal income tax charitable deduction for the fair market value of the asset and eliminate capital gains tax. Because of our nonprofit status, Northwestern does not pay capital gain tax when the University sells the gifted securities.
• A memorial gift. If you have a friend or family member whose life has been touched by Northwestern, consider making a gift to the University in his or her name.
• An endowed gift. Create an endowment or contribute to one that is already established to ensure that your support of Northwestern will last forever.
• A charitable gift annuity. Funding a gift annuity with appreciated securities or mutual funds will not only provide you with reliable payments for life and allow you to support the University, but it can offer numerous financial benefits. First, your annuity payments are often more than the dividends you would receive each year from the securities. Second, you will receive a federal income tax charitable deduction (when you itemize) in the year the gift is made and eliminate part of the capital gains tax you would have paid if selling the securities.
• A charitable remainder trust. Highly appreciated securities are one of the best ways to fund a charitable remainder trust. You may be reluctant to sell such assets directly because of the tax you would pay on the gain; however, if the assets were transferred to a charitable remainder trust, the assets can be sold without incurring the capital gains tax. The trustee can then reinvest the proceeds in order to secure a higher current income yield.
• A charitable lead trust. Rapidly appreciating assets such as stocks are a great way to fund a charitable lead trust. The assets transferred to the lead trust are frozen in value for transfer-tax purposes at the time of funding. At the end of the trust’s term, all appreciation that takes place in the trust will pass tax-free to your heirs.

*State laws govern payable on death accounts. Please consult with your bank representative or investment advisor if you are considering this gift.