Coordinating Charitable Gifts Around Market Volatility

Why coordinate gifts when markets move?

Market volatility changes the value of investments and the tax outcomes of gifts. Thoughtful coordination can: reduce taxes (by avoiding capital gains), preserve retirement income, and increase the buying power of the charitys dollars. It also prevents impulsive decisions driven by headlines and helps align your legacy objectives with short-term market conditions (IRS Publication 526 recommends keeping records and understanding valuation rules).

Below I lay out a practical, step-by-step framework I use with clients, explain the pros and cons of common techniques, show real-world examples, and provide documentation and timing checklists you can adopt.

Quick decision framework (what I use in practice)

1. Clarify your goals: charitable impact this year vs long-term, tax reduction, income needs, or estate planning.
2. Identify candidate assets: cash, appreciated publicly traded stock, bonds, privately held shares, real estate, or retirement accounts.
3. Evaluate tax consequences: donation deduction limits, capital gains exposure if you sell first, and how gifts affect AGI limits. Consult IRS Publication 526 and Publication 561 for valuation guidance.
4. Choose the vehicle: direct gift, donor-advised fund (DAF), charitable remainder trust (CRT), private foundation, or Qualified Charitable Distribution (QCD) for IRAs.
5. Document and time: get appraisals if needed, written acknowledgements from charities, and choose the tax year of deduction.

This framework helps avoid common pitfalls like donating depreciated assets that reduce tax benefit or failing to collect required substantiation.

Key strategies and how market swings change their value

• Donating appreciated securities directly to a public charity: If you give long-term appreciated stock, you generally get a deduction for fair market value and avoid capital gains tax on the appreciation. This is often the most tax-efficient move when a security has significant unrealized gains. However, if a security has recently fallen in value, the immediate deduction is lower; in that case, consider selling high-gain holdings earlier and donating other appreciated assets instead (IRS Publication 526).

• Donor-Advised Funds (DAFs): A DAF lets you contribute now (claim a deduction in the current tax year) and recommend grants later. During a market dip you can contribute appreciated assets and let the DAF manage timing of distributions. For more on practical DAF use and timing, see our guides on Donor-Advised Funds and strategic DAF use.

• Recommended internal reads: “Donor-Advised Funds 2.0: How to Use DAFs Strategically” and “Bunching Donations with Donor-Advised Funds: Year-by-Year Guide”.

• Bunching contributions: If you itemize only in some years or want to maximize benefit around a high-income year, consolidate several years of giving into one year (via direct gifts or a DAF). Market volatility may create windows when this is especially attractive.

• Qualified Charitable Distributions (QCDs) from IRAs: For eligible IRA owners, QCDs allow direct transfers to charities and can satisfy required minimum distribution (RMD) obligations without counting as taxable income. QCDs are useful when markets are volatile because they can reduce taxable income in high-income years; see our guide “Qualified Charitable Distributions: A Guide for IRA Owners” for details.

• Charitable remainder trusts (CRTs): CRTs can convert appreciated assets into an income stream while deferring immediate capital gains tax and providing a future gift to charity. During volatile markets CRTs can be structured to sell donated assets inside the trust and reinvest proceeds.

Practical examples (refined case studies)

Example A — Appreciated stock and a market dip

A client owned company stock that had doubled over several years. Facing a market correction, we analyzed two options: sell first and donate cash, or donate shares directly. Donating shares directly to a charity avoided capital gains tax and preserved a larger charitable gift when the stock price was still reasonably high. We sheltered the gain and recommended the charity sell and reinvest according to their policies.

Example B — Using a DAF during uncertain markets

Another client wanted immediate tax relief in a high-income year but wasnt ready to designate final grantees. We recommended funding a DAF during a brief market decline with a mix of cash and appreciated securities. That locked in the current tax deduction while giving the client time to recommend grants once markets stabilized.

Example C — IRA owner using a QCD in an up-and-down year

A retiree with an IRA had a large RMD approaching after a year of market volatility. Making a QCD directly to a favorite charity lowered taxable income and avoided selling concentrated positions in a down market. The distribution satisfied the RMD-equivalent need without increasing tax drag.

Tax and documentation checklist (must-dos)

• Confirm charity status: use the IRS Tax Exempt Organization Search to ensure the recipient is eligible for deductible contributions.
• Substantiation for cash gifts: any donation of $250 or more requires a contemporaneous written acknowledgement from the charity (IRS rules).
• Non-cash gifts: get transfer confirmation from brokerage or a receipt from the charity; for gifts over certain thresholds (typically $5,000 for securities) keep brokerage records; for real estate or tangible property, follow appraisal rules in IRS Publication 561.
• Track AGI limits: deductions for cash gifts to public charities generally have higher AGI limits than gifts of appreciated property; specific limits can vary by charity type and property — verify current rules on IRS.gov (Publication 526).
• Year of deduction: donations are deductible in the tax year when you make the contribution. For mailed checks, this is the date mailed; for electronic transfers, its the date of transfer.

Common mistakes and how to avoid them

• Donating assets that are underwater: avoid donating recently depressed assets expecting the charity to benefit more—unless youre donating cash. A depressed market lowers the charitable deduction when donating the asset itself.
• Failing to document: missing the written acknowledgement for gifts over $250 can disallow the deduction. Get receipts and broker confirmations.
• Selling before donating without reason: selling appreciated stock triggers capital gains—donate the stock directly instead when possible.
• Ignoring deduction limits: large gifts may be restricted by AGI limitations; plan multi-year strategies or use DAFs/CRTs to smooth the impact.

Timing rules and practical calendar ideas

• Year-end planning: review capital gains/losses, income forecasts, and projected RMDs by early Q4. If you plan to bunch donations, initiate transfers in time for the donation to clear before year-end.
• During sharp market declines: evaluate concentrated positions for tax-loss harvesting or consider donating other appreciated assets instead of the lost-value holdings.
• During rallies: donating appreciated positions can lock in higher deduction values; if timing is uncertain, a DAF lets you claim the deduction while deferring grant decisions.

When to call a professional

Coordinate with your CPA, financial advisor, and the charitys development officer when any of the following applies:

• You hold concentrated or privately held shares.
• You plan to donate real estate or tangible personal property.
• Your intended gift could trigger complex valuation or unrelated business income tax for the charity.
• You need to coordinate gifts with estate planning or large trust structures.

In my practice I often run a simple net-benefit model (tax savings vs liquidity needs) to decide whether to donate now, give to a DAF, or use a trust vehicle.

Resources and internal guides

• For donor-advised fund strategy and timing, see Donor-Advised Funds 2.0: How to Use DAFs Strategically (FinHelp).
• For IRA-specific gift rules and QCDs, read Qualified Charitable Distributions: A Guide for IRA Owners (FinHelp).
• For recordkeeping and timing, consult How to Document Charitable Donations for Maximum Deduction (FinHelp).

External authoritative sources:

• IRS Publication 526, Charitable Contributions: https://www.irs.gov/publications/p526
• IRS guidance on valuing donated property (Publication 561): https://www.irs.gov/publications/p561
• Consumer Financial Protection Bureau guidance on charitable giving: https://www.consumerfinance.gov/consumer-tools/financial-help/charity/

Professional disclaimer

This article is educational and reflects strategies commonly used by financial and tax professionals as of 2025. It is not personalized tax advice. Laws and IRS thresholds change; consult your CPA or tax attorney before making significant charitable gifts.

Author note

I have worked with individual and family donors for over 15 years to align giving with taxes and long-term financial goals. The examples above reflect anonymized cases and typical outcomes; results vary based on individual circumstances.