The Five Foolproof Steps to Every Non-Cash Gift
Over the past 20 years, I've worked on hundreds of non-cash gifts and the successful ones all had something in common. They all followed the same 5-step blueprint. Every single one of them. No matter the asset type or value, they all proceeded the same way. I didn't see it at the time, but recently I started noticing the pattern. (Kind of like seeing the Matrix) The unsuccessful ones failed for a number of reasons, but looking back - I think it was because for some reason they didn't follow what I call "The Five Foolproof Steps to Every Non-Cash Gift".
Non-Cash gifts can be extremely complicated, so if we can bring some order and predictability to them, why not? If we can follow a simple step-by-step process that improves the likelihood of success, let's do it! Ok, let me walk you through the 5 steps.
1. Know the Basics
Before you can have a confident conversation with someone about a non-cash charitable gift, you have to know some basic information about the asset you're talking about. It's helpful to understand things like:
- How it would be taxed if the donor sold it?
- What purpose has the asset served for the donor?
- What are the tax benefits or detriments if the donor were to contribute it to charity?
- How is the asset transferred from donor to charity?
- What is the donor trying to accomplish charitably?
- Do they want to make a gift during life or after death?
When you understand some basic pieces of information, it will be MUCH easier to have a productive conversation about how a particular non-cash gift may achieve goals for both the donor and the charity.
2. Ask For the Right Information
Once the donor has decided upon a particular asset they would like to donate, you'll have to do some investigation to make sure the gift is something the charity can accept. You'll want to ascertain things like:
- The value
- The condition
- Is there a market for selling it?
- How has the donor used it in the past?
- Are there any additional owners?
- Are there any restrictions that would prevent a gift?
- What are the costs of ownership?
Knowing what information to gather for a particular asset is essential. You want to go into a gift situation with your eyes wide open. You want to know exactly what you're getting into, but most charities I've worked with don't know what information to request. They know that they should investigate the details of the asset, but don't know what questions to ask. They fear missing something critical and sometimes decline the gift because of that fear. If you fall into that camp, fear not - later on I'll share a resource that will tell you exactly what information to request for each asset type.
3. Evaluate for Opportunity and Risk
Once you've collected all the necessary information about the proposed gift, it's time to review it all and decide what opportunities and risks the gift might bring with it. The gift could be extremely valuable, but it could also be environmentally hazardous. It could bring legal risk or tax liability. Performing this due diligence can be a time-consuming process and you'll probably have to bring in some helpers to get it done right. You may need legal counsel to advise you on legal risks. You may need to hire a real estate inspector to evaluate the condition of a property. You may need to consult with an auction house to determine if there is a market for selling a piece of artwork. Don't try to do it all yourself. Gather a team who can all pitch in and determine whether the gift is something the charity is ready to accept or not.
4. Accept or Decline Respectfully
If you're ready to accept the gift, great! If not, it's important to decline respectfully.
The donor has offered a generous gift and it is important to acknowledge that. I recommend meeting with the donor to 1) thank them for their offer, and 2) explain exactly why you are unable to accept their gift. Explain in clear terms and illustrate your reasons. I also recommend explaining your decision in writing and giving it to the donor so they can refer back to it later.
If the donor really cares for your organization, they should understand why you must decline. They may decide to consider donating a different asset that brings you less risk.
5. Manage or Liquidate
Most charities adopt a policy that requires them to liquidate all non-cash gifts as soon as possible. Sometimes there may be a gift you want to keep.
If you're keeping the gift, make sure you have a plan for taking care of it - no matter what it is. You don't want it to fall into disrepair, get lost, damaged, or stolen. You'll definitely want to acquire the right insurance to protect it.
If you're selling, it's probably a good idea to liquidate quickly and for the best possible price. Holding assets often comes with carrying costs or other risks that can be significant. You may need to hire a broker, an auctioneer, or other helpers to get the asset sold. Assemble your sales team and get busy! The sooner it sells for a great price, the sooner you can apply that money to your world-changing mission!
As you can probably imagine, there's a lot more to each of these steps than we have space to cover here. The good news is that there is now a resource that outlines this 5-step process for every single asset type you're likely to encounter.
I took my 20 years of experience with accepting non-cash gifts and put it all into a book called Turning Wealth Into What Matters.
It will eliminate the fears you have when it comes to non-cash gifts. It will provide you with:
- Fundamental knowledge of each asset type.
- The Five Foolproof Steps you can use with virtually every non-cash gift.
- Proven internal procedures you can begin using right away.
- Detailed intake checklists so you can be sure to collect all the right information.