Gifts of Mutual Fund Shares

Many more Americans these days own shares in mutual funds than own individual stock.  So you’d think gifts to nonprofits of mutual fund shares would be much more commonplace than gifts of stock.

You’d think so, and I thought so once, but that is not the case.  The typical development shop will see stock gifts every so often (if you let your donors know you accept them, and how to convey that gift).  Gifts of mutual fund shares are somewhat rare, actually.

Here’s what to do when you receive that gift of mutual fund shares.

I’m sorry to say it is more complicated than receiving a stock gift.  You will be in contact with the company where the donor held those mutual fund shares, whether Fidelity, Schwab, or someone else.  The company will invite you to open an account with them and if you want that gift, that’s what you have to do.

Once your account (your organization’s account) is open, then and only then will the company be able to transfer the mutual fund shares from the donor’s account to yours.  There are forms to do all of this, and the companies are well-versed in the process.

Finally, once your account has the shares, you can ask for those funds to be “cashed out” and the check sent to your organization.

But here’s the most important thing of all to remember:  DO NOT close your account completely!  Keep it open, with $5 or $100 or whatever in the account.

That way, the next time you receive a gift of mutual fund shares and need to deal with Fidelity, for example, your account is already open and the process is vastly simplified.

Here’s the one place where a gift of mutual fund shares is similar to a gift of stock: both are “gifts in kind.”  So, when you send the acknowledgment letter to the donor you are not thanking him or her for the money you received at the end of the process, but rather for the gift of X shares of Y mutual fund, which transferred to your account on Z date.

You can tell the donor the value of those funds on that date, which is how you will credit their gift to you, but you’ll also stress that in keeping with IRS rules, the donor must establish the value of the gift themselves.

Keep the account open.  Thank the donor.  They will be likely to repeat the gift next year!

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