Key considerations when charitable planning involves international giving

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Schwab Charitable™ offers insights into high-impact and tax-smart philanthropy beyond the US

ONE THING remains true: Americans continue to give during tumultuous times around the world. Their giving to international affairs organizations totaled $33.71 billion in 2022, representing six percent of all donations received by charities, according to Giving USA.* This dollar amount represented the highest inflation-adjusted value ever for the international affairs subsector. The generous contributions of US donors to international causes are not limited to isolated incidents, but rather are part of a growing trend propelled by the desire to give back in response to global tragedies, ranging from earthquakes in Haiti to the crisis in Afghanistan. But with this desire, are there considerations about how giving to international causes differs from giving to US causes? In today’s digital world, communities and organizations can foster connections around the globe more easily than ever before, and donors are also confronted with constant stories about global challenges and may feel overwhelmed by how to help. Financial advisors can support their clients by providing tools and strategies to maximize charitable impact. As emerging generations become more aware of global crises and disasters, it’s crucial for advisors to introduce innovative channels for philanthropy and be aware of the options for giving internationally. The tendency to contribute to disaster relief efforts differs significantly among generations. For example, in the past year, Gen Z and millennial contributors have shown a tendency to allocate a larger portion of their donations to disaster relief, in contrast to Gen X and baby boomer donors. This shift emphasizes the importance of aligning donation strategies with the values and concerns of younger donors. Schwab Charitable, one of the largest national providers of donor-advised funds, recognizes both the overwhelming need for support, and the complexity of choosing where to direct it. Schwab Charitable emphasizes a proactive and informed approach to philanthropy.

Schwab Charitable™ is an independent 501(c)(3) with a mission to increase charitable giving in the US 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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How covid-19 Affected Non-Profits

Moderate negative impact

38%

Significant negative impact

28%

Little negative impact

12%

Moderate positive impact

0.5%

“The requirements and considerations vary for international donations. Schwab Charitable tries to make international giving as simple as possible for donors, and our specialists in international granting can guide donors to help them determine the most effective and efficient way to meet their charitable giving goals”

Sam Kang, Schwab Charitable

However, he adds, nonprofits have been resilient. “Most of our insureds are not only recovering back to their pre-pandemic state, but are in fact expanding,” he says. Parvathy Sree, vice president of nonprofit underwriting for AmTrust Financial Services, agrees. She says some nonprofits, such as homeless shelters and schools, adapted particularly well to the challenges. “Nonprofits with good management and decent financials were able to survive the last year and are seeing the fruits of their hard work and diligence,” Sree says, but she cautions growing organizations to be diligent with loss control and risk mitigation, emphasizing that while claim counts are down and court cases are in limbo, things could change.

The organization reports that its donors granted $6.1 billion to charity in 2023, and six percent of all grants – or $363.8 million – was in the international/foreign affairs sector. The dollars granted to the sector in 2023 represented a 24 percent increase over 2022. In addition, Schwab Charitable works with the Center for Disaster Philanthropy to provide donors with resources to support those affected by natural and humanitarian crises. “There are several ways to give internationally,” notes Sam Kang, president of Schwab Charitable. However, the process of granting internationally can sometimes be more complex than donating within the US. “The requirements and considerations vary for international donations. Schwab Charitable tries to make international giving as simple as possible for donors, and our specialists in international granting can guide donors to help them determine the most effective and efficient way to meet their charitable giving goals,” Kang explains.

The complexity stems from navigating the legal and regulatory frameworks of both the donor’s and the recipient’s countries. Understanding these challenges is crucial for those looking to make an impact beyond their borders. Donor-advised funds like those provided by Schwab Charitable can help donors and advisors by providing guidance and proven processes that address the donor’s charitable goals. Tools such as Charity Navigator and GuideStar are also invaluable for examining a charity’s program details, financial health, and other critical information, aiding donors in choosing organizations that align with their philanthropic goals.

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If you're an advisor who enjoys creating deep and meaningful connections with your clients, bringing up charitable giving is a fantastic way to peel back the layers and discover what truly drives them. When you learn about a client’s philanthropy, you’re getting a glimpse into their core values. The causes they choose to support act as a mirror to the things closest to their hearts. Beyond getting to know your clients and their priorities better, it’s a great way to connect with their families, too, especially if they’re looking to get their children involved in charitable giving. Family philanthropy not only helps families pass down their values to create a legacy, but also creates a bridge between advisors and the next generation of donors.

“A financial advisor can be a great resource for donors looking to maximize their charitable contributions by leveraging tax benefits”

Sam Kang, Schwab Charitable

Donating directly to international charities allows donors to focus their support on specific communities or initiatives. Yet, navigating the landscape of foreign charitable organizations can be daunting. Donors must ensure their chosen charities are not affiliated with fraudulent activities or are not listed on US sanctions or terrorist lists; the Office of Foreign Assets Control provides a database of such entities. “One way to make sure you’re providing support to a reputable cause is by working with a familiar or trusted US-based charity that has international operations,” Kang says. Notable examples include the American Red Cross, Doctors Without Borders (also known as Médecins Sans Frontières), UNICEF, and the International Committee of the Red Cross.

For those seeking tax deductions for donations, it’s crucial to confirm that the charity complies with IRS standards. The IRS provides a searchable database for tax-exempt international charities. If an organization is not listed, it must undergo an “equivalency determination” (ED) by a legal professional or an “expenditure responsibility” (ER) process to verify its eligibility for a US tax deduction. Moreover, verifying the tax-exempt status of domestic charities is more straightforward. However, Kang advises, “A financial advisor can be a great resource for donors looking to

What do non profits need coverage for?

Engaging with intermediary organizations or donor-advised funds

Why discuss philanthrophy?

Why discuss philanthropy

Published May 20, 2024

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Why discuss philanthropy?

maximize their charitable contributions by leveraging tax benefits, as not all gifts to US organizations are tax-deductible.” According to Kang, donations to charities based outside the US are often complex for individuals to navigate, and donating through a donor-advised fund can simplify the process.

For those who want to donate to a foreign charity but don’t want to vet and monitor the charity directly themselves, there are intermediary organizations outside the US. These intermediaries offer expert guidance at a regional or even local level, ensuring donations are effectively allocated and monitored for impact. For instance, someone looking to support women’s education internationally might partner with a foreign intermediary to find organizations already making a significant impact. The donor then contributes through the intermediary, which allocates funds to the chosen charity and oversees the use of the donation to guarantee its effectiveness. Leveraging a donor-advised fund account is a great option for those looking for a simple, tax-efficient way to give internationally. “When you give via Schwab Charitable, you have access to a network of vetted international intermediaries that are local to their areas of expertise and can perform a review of selected charitable organizations and projects, as well as monitor projects firsthand for effectiveness,” Kang says. This approach not only simplifies the process for the donor but also ensures that contributions are making a meaningful difference in the targeted communities. Schwab Charitable’s Direct Global Giving Program can also facilitate the identification of eligible foreign charities that align with a donor’s objectives.

More than one pathway to international giving

Engaging with intermediary organizations or donor-advised funds

Creating a charitable plan is a critical component of integrating philanthropy into broader financial planning. This process involves setting clear goals, understanding the legal and tax implications of charitable giving, and selecting the most effective vehicles for donations. Advisors play a crucial role in guiding clients through this planning process. Charitable giving can offer significant tax benefits – but, more importantly, giving reflects a person’s values through the causes they choose to support. Once a donor develops a charitable plan, Schwab Charitable offers three options for tax-smart, high-impact philanthropy inside and outside the US. Advisors can also help their clients make their giving simpler and more strategic while strengthening relationships and creating opportunities to connect with the next generation of donors.

It starts with a plan

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More than one pathway to international giving

Engaging with intermediary organizations or donor-advised funds

WOMEN ADVISORS

DIVERSITY

RETIREMENT

FINTECH

TOPICS

NEWS

Issue Archive

My Account

Subscribers

Event Calendar

Editorial Calendar

Media Kit

Special Reports

Custom Research Services

Request Reprints