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Record Generosity at Schwab, Fidelity Giving Accounts

Double-digit market returns in 2010 helped boost Americans’ charitable spirit, with top donor advised funds reporting new records in charitable contributions, industry executives report.

Double-digit market returns in 2010 helped boost Americans’ charitable spirit, with top donor advised funds reporting new records in charitable contributions, industry executives report. Fidelity Charitable Gift Fund, the nation’s largest donor advised fund program with $5.4 billion in assets, said donors directed that a record $1.2 billion be sent to not-for-profit groups last year. Incoming contributions to the Fidelity program exceeded $1.6 billion last year, up 42 percent from 2009.

Meanwhile, Schwab Charitable said contributions to its donor advised fund reached a record $1.09 billion, more than double the amount in 2009. Schwab Charitable’s assets exceed $3 billion. Perhaps it shouldn’t come as a surprise; the Center on Wealth and Philanthropy at Boston College predicted last summer that charitable giving by individuals in the United States would increase in 2010 by 3 to 4.5 percent.

The best indicator of charitable giving overall is gross domestic product, Schwab Charitable President Kim Wright-Violich says, but the best predictor of giving to charitable vehicles such as donor advised funds is the performance of the stock market. Appreciated securities are among the most popular contributions; donors can deduct the full market value of the security without paying capital gains. Securities accounted for 50 percent of incoming contributions last year at Fidelity’s Charitable Gift Fund, up from 44 percent a year earlier. And contributions of non-publicly traded assets such as C- and S-corporation stock and real estate nearly tripled last year, Fidelity says. “Increasingly, advisors are helping their clients understand there are other assets than cash to give,” Fidelity Gift Fund President Sarah Libbey says.

Concerns about the prospect of the sunset of Bush-era tax cuts at the end of 2010 had some donors wondering whether to change their giving strategies. “There were probably a few more people on the sidelines who waited until December to act,” Libbey says. In the end, Congress and President Obama reached a deal on extending the tax breaks. Donors subsequently stepped up; more than $750 million in contributions to Fidelity’s fund were made in December, a record.

As a structure for giving, donor advised funds are attracting more attention. More than $200 million of contributions that were made to Schwab Charitable came from private foundations that had been shuttered by their founders; they were looking for simpler and less expensive ways to give, Wright-Violich said. Among other things, foundations require board meetings, audits, and public filings that report on who benefits from the foundations’ largesse.

By contrast, donor advised funds are accounts that people can contribute to, that are managed by IRS-sanctioned charities; the charities in turn write checks to not-for-profit groups selected by the donors. Last year Fidelity launched a slew of innovations to boost its popularity with advisors. They included allowing advisors to invest Gift Fund account money in alternative investments such as hedge funds and private equity funds; the firm also created a private donor group that provides dedicated service for high-net-worth donors with gift fund account balances of $1 million.

What are the prospects for giving for 2011? Wright-Violich is optimistic. The last time Schwab Charitable received more than $1 billion in contributions from donors was 2007. Grants from the donor advised fund to not-for-profits jumped to $425 million the following year, a 42 percent increase.

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