Helping clients increase their giving power

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Schwab Charitable’s managing director Fred Kaynor explains how to maximize giving in a tax-smart way

Schwab Charitable™ is an independent 501(c)(3) with a mission to increase charitable giving in the U.S. by providing a tax-smart and simple giving solution to donors and their investment advisors. Since inception, our donors have granted over $33 billion to charity. A Schwab Charitable donor-advised fund account enables donors to contribute cash or appreciated assets to a charitable account to help realize the greatest possible tax benefits – and then support their favorite charities over time. With Schwab Charitable, donors are empowered to incorporate charitable planning into their everyday lives, giving them the potential to make a bigger difference in the world.

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“The assets are invested with the goal of growing those assets over time so that more can go to charity. Donors can then grant to any qualified U.S. public charity of their choice at any time”

Fred Kaynor, Schwab Charitable

“While charitable giving is typically correlated with markets, the resilience of donor-advised funds provides a consistent source of funding for charities during challenging economic times, as contributions may have been previously made and those resources have already been set aside for charity”

Fred Kaynor, Schwab Charitable

Published 13 Nov 2023

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For those who may not be familiar, can you share what Schwab Charitable is and your role? Schwab Charitable™ is an independent 501c3 public charity, and our mission is to increase giving in the U.S. by offering donor-advised funds and philanthropic resources that make charitable giving tax-smart, simple, and efficient. We also offer tools, guidance, and relationships that empower donors to incorporate charitable planning into their everyday lives and financial planning. As the managing director of relationship management, marketing, and partnerships, I’m responsible for engaging and building relationships with donors, financial advisors, charities, and other leading organizations within the philanthropic sector to help increase the impact and efficiency of giving in the United States. Describe donor-advised funds and the benefits of incorporating donor-advised funds into charitable planning. Donor-advised funds provide a simple, tax-smart investment solution for charitable giving. They are like a charitable investment account with the sole purpose of helping donors maximize their support of the charities and causes that are most meaningful to them. Donors can contribute cash, securities, or other appreciated, non-cash assets. Once a donor contributes to their account, they are eligible for a current-year tax deduction. When donating appreciated non-cash assets, donors can also potentially eliminate capital gains tax they would otherwise incur if they sold those assets first, which can mean even more resources available for their charities. The assets are invested with the goal of growing those assets over time so that more can go to charity. Donors can then grant to any qualified U.S. public charity of their choice at any time. Once funds are given to a donor-advised fund account, they cannot be returned to an individual and must be used for a charitable purpose. Donor-advised funds help make giving convenient and unlock assets that might not otherwise go to charity. There is no minimum account size, and growth of invested account assets is tax free. Of our donors, 70% consistently say they give more than they otherwise would because of their donor-advised fund.

Where do advisors fit in with helping clients with charitable planning, and why does it make sense for financial advisors to include charitable planning in their offering? More than 3,500 independent advisory firms work with Schwab Charitable and its charitable consultants to optimize their offering. Many advisors offer charitable planning to grow their practices, deepen client relationships, and start conversations that lead to referrals. More and more donors are looking to their advisors to create a thoughtful, strategic approach to their family philanthropy. Charitable giving in the U.S. reached nearly $500 billion in

2022, according to Giving USA. Additionally, most affluent households (85%) give to charity – through good times and bad. It’s a great time for advisors to begin offering charitable planning if they don’t already. According to a Cerulli report, $84 trillion has started moving across generations. Of this, $12 trillion is expected to go to charity by 2045. This provides a huge opportunity for advisors to work with existing and new clients on wealth management and charitable-planning needs. Let’s discuss the broader giving environment. Have today’s market conditions – inflation, high interest rates, and concerns about a potential recession – impacted charitable giving? In Giving USA’s recent annual report on philanthropy, total giving in the United States declined in 2022. This is only the fourth time in four decades that donations did not increase year over year. However, Schwab Charitable reported an increase in charitable giving through our donor-advised funds in the most recent fiscal year. While charitable giving is typically correlated with markets, the resilience of donor-advised funds provides a consistent source of funding for charities during challenging economic times, as contributions may have been previously made and those resources already set aside for charity. We’re approaching the end of the year, a time that many consider to be the heart of the giving season. What is the first step advisors should take with their clients when considering tax strategies around year-end giving? Charitable giving and tax-planning needs for clients can differ, so it’s important for advisors to work with each client to review their overall charitable-giving goals and the corresponding tax benefits or incentives that are available to them. Overall deductions for donations to public charities, including donor-advised funds, are generally limited to 50% of one’s adjusted gross income (AGI). The limit increases to 60% of AGI for cash gifts, while the limit for appreciated non-cash assets held more than one year is 30% of AGI. If a donor’s 2023 contribution and deduction exceed these AGI limits, the amount above limits may be carried over for up to five subsequent years. What other factors should advisors consider as we near the end of the year? A few tax-smart strategies advisors can use with clients at the end of the year to increase charitable giving:

Donate non-cash assets that have been held for more than a year – this helps clients potentially eliminate capital gains taxes they would incur if they sold the asset, and they can leave up to 20% more for charity. Consider bunching gifts to hurdle the 2023 standard deduction – clients can “bunch” their 2023 and 2024 charitable donations together in 2023 to exceed their 2023 standard deduction. Evaluate all investments to find the most tax-smart, high-impact donation – advisors can help their clients identify non-cash assets they own that have appreciated in value and assess potential tax liability if clients were to sell the assets. Prioritize donations based on a client’s largest taxable event in 2023 – if a client experiences a large taxable event in 2023, contributing a portion of their assets can be an effective way to reduce their taxable income, offset or potentially eliminate capital gains taxes, and maximize support of their favorite charities and causes.

How do donors and their advisors decide when the best time to give is? When creating or updating a year-end giving plan, donors and their advisors find it helpful to segment charitable goals two ways: strategies for the current year and strategies for the future, including extending charitable legacies beyond their lifetime. The choice about when to give depends on a person’s charitable goals, financial goals, family needs, estate-planning objectives, and desired charitable legacy. Tax benefits, either now or deferred, are also a key factor. The Schwab Charitable Giving Guide is a comprehensive resource that donors and their advisors can use to create a customized plan to maximize the impact of philanthropic giving. The guide helps people identify their charitable giving goals, establish a giving structure, and create and implement a giving plan. Do you have any tips for advisors working with clients who are interested in increasing their charitable giving or looking for additional nonprofits/causes to support? Every donor is different, but defining one’s philanthropic purpose is important when thinking about charitable giving. This goes hand in hand with evaluating motivations, values, priorities, and giving styles. At the heart of all charitable giving is a genuine interest in supporting causes that are meaningful to the donor. Schwab Charitable offers many tools and resources to help donors and their advisors identify the causes that are most important to them. There are over 1.5 million 501(c)(3) charities registered in the U.S. It’s important to do some research to identify legitimate, highly effective charities that can have the greatest impact on the causes donors want to support. Donors can use online tools, including those available at SchwabCharitable.org, to search for charities addressing a specific cause and help find charities to donate to. Other resources, such as Candid, Charity Navigator, or the Center for Disaster Philanthropy also provide information on charities one can donate to. What resources does Schwab Charitable offer advisors to help support their clients this giving season? Schwab Charitable provides tools, resources, and consultative support to help clients give more strategically and help nonprofits attract donors. Our resource center also includes helpful information and year-end giving deadlines to help donors plan their giving and better understand the benefits of certain giving strategies, including:

A series of materials developed with the National Center for Family Philanthropy Bunching and tax-savings calculator and charitable donation calculator Inspiring donor stories The Nonprofit Fundraising Toolkit and other resources for charities

Anything else you’d like to share? Generally, I’d advise that if clients are passionate about philanthropy or they have a single issue that is important to them, most would be amenable to opening a donor-advised fund. Schwab Charitable has a dedicated team of charitable consultants, with a bevy of resources to help educate advisors and their clients on the benefits of donor-advised funds and get started. Finally, I would like to thank the over 3,500 registered investment advisors who partner with Schwab Charitable to support their clients’ philanthropic goals. It is a privilege to offer our solution as a way and to broaden and expand these important client relationships around charitable giving.

A donor’s ability to claim itemized deductions is subject to a variety of limitations depending on the donor’s specific tax situation. Consult your tax advisor for more information. Schwab Charitable™ is recognized as a tax-exempt public charity as described in Sections 501(c)(3), 509(a)(1), and 170(b)(1)(A)(vi) of the Internal Revenue Code. Contributions made to Schwab Charitable Fund are considered an irrevocable gift and are not refundable. Please be aware that Schwab Charitable™ has exclusive legal control over the assets you have contributed. Although every effort has been made to ensure that the information provided is correct, Schwab Charitable cannot guarantee its accuracy. This information is not provided to the IRS. Schwab Charitable is the name used for the combined programs and services of Schwab Charitable Fund™, an independent nonprofit organization. ©2023 Schwab Charitable Fund. All rights reserved. (1023-3S1F)

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Published 13 Nov 2023

Fred Kaynor, Schwab Charitable

“The assets are invested with the goal of growing those assets over time so that more can go to charity. Donors can then grant to any qualified U.S. public charity of their choice at any time”

Fred Kaynor, Schwab Charitable