Hedging One’s Bets on the Longevity of a Bull Market

Many investors are understandably nervous about the future direction of the stock market, amid assertions that stocks are overvalued and that a correction may be just around the corner.  Profit taking entails capital gains and investment income taxes as high as 23.8% in the highest brackets, but several charitable gift strategies might ease the tax pain and move donors into arrangements that let them sleep better at night:

  • Charitable remainder unitrusts enable donors to deduct remainder interests based on the current fair market value of securities they contribute – and trustees can sell and reinvest without depletion from taxes;

  • Contributing stock for a charitable gift annuity avoids capital gains tax and net investment income tax on a large percentage of capital appreciation, and any remaining gain can be reported in installments prorated over the donor-recipient’s life expectancy;

  • Outright gifts of highly appreciated securities facilitate charitable giving at a great discount, and donors might consider making several years’ worth of annual gifts while stock values are high – possibly to a donor-advised fund.


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