Donor-Advised Funds Propel Fidelity Charitable to Record-Breaking Year

Fidelity Charitable, operator of the nation’s largest donor-advised fund program, said its donors set records in 2011 both in the amount of money contributed to the fund and in the amount that was taken out of the fund and granted to charities.

Donors contributed almost $2.9 billion to Fidelity Charitable in 2011, up from a bit over $1.6 billion in 2010. Meanwhile, they also made 380,000 grants to nonprofits nationwide, for a total of more than $1.3 billion, up 8% from 2010’s level in both the number of grants and the total amount granted.

ON FINANCIAL PLANNING:

Giving It Away, columnist Deena Katz delves into the role financial advisors can and should play in guiding clients’ charitable giving endeavors through donor-advised funds and appreciated securities. Read it now.

“Certainly we are pleased that just as Fidelity Charitable was marking its 20 years as the first national donor-advised fund, we had record results. We believe that is showing that donor advised funds are becoming a much more well-known and popular choice among committed givers,” says Sarah Libbey, president of Fidelity Charitable.

Donor advised funds have emerged as a highly popular way of organizing charitable giving, and are being used either instead of, or as a supplement to, private foundations. Donor advised funds allow donors to contribute money that’s earmarked for charitable giving and get the tax benefits right away, even if they take a while to decide which charities exactly should receive grants. There’s also the advantage of anonymity with a donor advised fund. In a private foundation, the donor is known to be the grantor. However, Fidelity Charitable is the tax reporting entity for the donor advised fund program, allowing donors to remain anonymous if that’s their preference. “You can send some of your grants in name and some anonymously. It’s the best of both worlds,” Libbey says.

Many of the contributions have come in the form of appreciated securities, according to Libbey. Donations of appreciated securities were 71% of total contributions to the fund, up from 51% in 2010.

Deena Katz, in her column “Giving It Away” in the February issue of Financial Planning, talks about using donor-advised funds and appreciated securities with Russell James, director of Texas Tech’s new online Graduate Certificate in Charitable Financial Planning.

In the column, James explains that replacing cash gifts with gifts of appreciated securities allows clients not to pay capital gains tax on the gifts. What’s more, this can be done without changing the portfolio, James says, since a client who likes the stock that was just given away can purchase more of it with the cash he or she might have originally been intending to give to a nonprofit. And that’s without having to wait for 30 days, since wash sale rules only apply to losses, and these are appreciated securities being donated.

Look for the complete column online and in print in the February issue of Financial Planning. The content of the Texas Tech graduate course can be previewed free at www.EncourageGenerosity.com.

Danielle Reed writes for Financial Planning.