Of course, you can opt for the path of least resistance and just refuse any non-cash gifts. But you run a real risk of alienating potential donors and excluding supporters of your organization’s mission who have significant holdings of valuable real assets. Simply throwing open the door to any and all donations, on the other hand, can quickly turn into a logistical nightmare.
Caveat recipiēns (let the recipient beware)
Non-cash gifts can bring both unanticipated costs and risks to your organization. It’s not hard to imagine gratefully accepting a beautiful lakeside home only to find out when you turn around to sell the property that it’s situated adjacent to an old toxic dumping site. Even situations far less extreme, still pose potential challenges.
Unlike cash (or even securities), real assets may require costly upkeep or maintenance that must be carefully factored into any decision regarding whether or not to accept them as a gift. Your organization may have neither the in-house resources nor the expertise necessary to liquidate or preserve the ongoing value of certain assets.
What constitutes a real asset?
The term ‘real assets’ encompasses any non-financial appreciated tangible assets such as:
- Real estate (homes, apartment buildings, commercial property, land, etc.)
- Business interests
- Book collections
- Oil, gas or mineral rights
- Timber holdings
Additionally, both the asset gifted as well as the source of the gift may run counter to your organization’s charitable mission. While a $1 million gift would be a welcome windfall for a community healthcare advocacy nonprofit, what happens if that gift comes in the form of 10,000 shares of a cigarette manufacturer stock? What do you do if the individual offering a generous gift to your foundation has ties to an unpopular organization or possesses a controversial political opinion?
Even gifts that don’t raise any obvious red flags (including some cash gifts) may prove problematic when they’re accompanied by excessive restrictions. Some donors may wish to stipulate that in-kind gifts not be liquidated or mandate exactly how cash gifts can or cannot be spent. It’s an understandable desire, but your nonprofit needs to ensure that the demands associated with a gift won’t in any way impede the mission or needs of the organization.
Holding onto gifted real assets of significant value (e.g., a $1 million piece of real estate) may also necessitate a reallocation of portfolio assets to maintain target allocations. In addition, these types of assets often require extensive investment expertise to identify and monitor appropriate performance benchmarks.
Despite all these potential challenges, turning down a large gift or bequest—especially when the organization would benefit from the infusion of funds—may be one of the hardest decisions any nonprofit must face. To aid in the decision making process, you need a clearly-defined and well-articulated construct that eliminates any subjective desire and guides gift acceptance decisions.