The resilience of giving: philanthropy persists through economic uncertainty

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Schwab Charitable’s donors are making a record impact with strategic charitable contributions and tax-smart planning

PHILANTHROPY HAS been a defining American trait, deeply embedded in the cultural fabric. Even given recent challenges in the economic landscape, with fluctuating market trends, sustained inflation, soaring interest rates, and looming fears of an economic downturn, Schwab Charitable donors reached unprecedented levels of granting. Despite a difficult year for the markets, Schwab Charitable donors increased their grants to charity in fiscal year 2023 to an impressive $5 billion. This represents an 8% increase from the previous year. It seems that adversity has only bolstered the resolve to give back, with donors responding to crises with heightened generosity. Fred Kaynor, managing director, marketing, business development and strategic partnerships at Schwab Charitable, shares that advisors should feel optimistic about their philanthropic clients’ desires to integrate giving into their wealth management plans. He asserts that meaningful wealth management starts with understanding clients’ dreams and goals, which often include their philanthropic aspirations. By engaging in conversations about charitable goals and motivations, advisors can guide clients through the nuances of giving, whether it’s through cash or non-cash assets or creating a lasting charitable legacy.

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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“Advisors who incorporate a strategic charitable plan into wealth management can help clients unlock tax benefits that provide more opportunities for giving and more dollars for charity”

Fred Kaynor, Schwab Charitable

As giving season kicks into high gear, doing good is at the forefront of everybody’s mind. Investment portfolios are diversifying to include a broader array of assets beyond just stocks and bonds, presenting advisors with enhanced opportunities to pinpoint non-cash assets suitable for tax-efficient charitable donations. “Tax-smart giving allows donors to maximize their impact on causes that are important to them,” Kaynor maintains. “Advisors who incorporate a strategic charitable plan into wealth management can help clients unlock tax benefits that provide more opportunities for giving and more dollars for charity.”

Direct contributions of non-cash assets given to charities through donor-advised fund accounts can boost the total donation value by as much as 20% by bypassing the capital gains tax on those assets. In fiscal year 2023, 56% of the contributions to Schwab Charitable consisted of non-cash assets, including publicly traded stocks, private business interests, and alternative investments. Kaynor says, “We expect non-cash assets, including alternative investments, to continue to grow in popularity as charitable contributions because they are tax-efficient and increase clients’ impact on the causes they support.”

Donor-advised fund providers further streamline the donation of non-cash assets by managing the sale and providing consolidated tax records, which eases the burden of tracking individual tax receipts. Kaynor says, “Many ultra-high-net-worth clients have also found that opening a donor-advised fund to complement a private foundation helps them achieve their philanthropic goals. Donors may set up a donor-advised fund in their family’s name for use by multiple donors and establish a succession plan to continue their philanthropic legacy beyond their lifetime. The fees for donor-advised funds tend to be significantly lower than the expenses private foundations carry for legal and tax activities, investment management, and staff salaries.”

By setting up a donor-advised fund for children and/or grandchildren, the next generation is actively involved in the process. For example, you can open a donor-advised fund in your grandchild’s name with a small starting contribution and name them as the designated successor. This approach allows the giftee to engage in giving to charities in a structured and significant manner. Kaynor notes that linking personal goals to high-impact giving strategies fosters deeper advisor-client relationships. He says, “Charitable planning offers advisors an opportunity to help clients achieve their aspirations in an area that is deeply personal. The result is often deeper client relationships and referrals. And when the whole family gets involved in charitable giving, advisors can build a bridge to a younger generation that will inherit trillions of dollars in the coming years.”

Philanthropy Graphic resilience of giving

Achieving impact and tax benefits

Published 04 Dec 2023

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The rise of donor-advised funds

Schwab’s 2023 RIA Benchmarking Study revealed that a substantial 88% of independent advisors now incorporate charitable planning into their services, making it a mainstream offering. Advisors are now tasked with offering expanded services, such as charitable planning, to enhance and grow their businesses. Donor-advised funds offer a straightforward, tax-efficient approach to philanthropy, making strategic charitable giving accessible to advisors and their clients regardless of account size. Donor-advised funds are user-friendly, require no minimum account balance, facilitate tax-free potential asset growth, and maximize charitable contributions. “One of the many benefits of the donor-advised fund is that donors can contribute to their accounts during more financially stable times and invest those assets for potential growth while they’re in the account, thus having readily deployable funds to grant each year regardless of the broader economic environment,” says Kaynor.

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. (1123-3YZB)

A donor-advised fund is a simple, tax-smart solution for charitable giving that makes strategic giving accessible to advisors and clients of all sizes.

Donor-advised funds like Schwab Charitable are convenient and easy to use, have no minimum account requirements, offer tax-free growth of invested account assets, and help unlock more dollars for charity.

Donor-advised funds can streamline donations of non-cash assets, such as publicly traded securities and real estate, to help donors maximize their charitable giving.

Fred Kaynor breaks down the donor-advised fund: