- 1). Decide what you want to donate. Donating shares of mutual funds that have increased in value is a good way to avoid capital gains taxes. If the shares have decreased in value they can be donated, but it is not good stewardship. Instead, sell the shares and donate the proceeds to the charity.
- 2). Sell your shares to the charity at a cost below fair market value. Calculate the cost basis (average cost of the amount you originally paid for all shares) for tax purposes. The difference between the sales price and the fair market value is the donation.
- 3). Create an irrevocable charitable trust fund with mutual fund shares. The trust can then provide for fixed or variable distributions for the life of the donor. This is an example of a "deferred gift." The advantage is that it allows the donor to avoid capital gains taxes and the trust will continue to provide disbursements into perpetuity.
- 4). Send stock certificates directly to the charity along with a letter describing the stock and your intention for the making the gift. You may also want to include how you want the shares to be distributed if you have a specific purpose for the donation. Be sure to consult your attorney and provide a signed stock power form (available from any broker). You can also have your broker to transfer shares directly to the charity.
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