More On Tax Planningfrom The Advisor's Professional Library
- Annuities: Estate Tax The value of certain types of annuities may be included in an estate’s value. Understanding the intricacies of these inclusions is a critically important aspect of estate planning.
- Charitable Giving Charitable giving can reduce your clients’ tax liabilities. However, the general and verification rules for the deduction of charitable gifts must be understood in order to take full tax advantage of such gifts.
Kim Laughton, acting president of Schwab Charitable, Schwab’s donor advised fund, said that through Nov. 30, 2011, contributions to the fund are up 76% from 2010, while grant-making is up 35%. In an interview with AdvisorOne on Dec. 12, Laughton (left) called those increases “refreshing, given the amount of uncertainty in the markets,” and pointed out that 68% of those contributions have come in the form of appreciated securities. “When the markets are up,” she said, the percentage of appreciated stock donated goes up as well.
She further noted that in 2009, the last recessionary year when the market declined, appreciated securities amounted to just 49% of contributions to Schwab Charitable.
Regarding grant-making, Laughton said that “One of the wonderful things about donor-advised funds,” is that you can continue to give even in poor market conditions,” noting that “our grants were still up in 2008.”
This fall, Schwab Charitable announced two initiatives making it easier for clients of advisors to indulge their charitable giving tendencies. On Oct. 19, it lowered from $100 to $50 its individual grant minimum–the smallest amount that donors may recommend from their accounts to charitable organizations of their choice. On the same day, Schwab announced a Charitable Legacy Program that enables qualified donors to extend their charitable grant-making over time after the donor’s death.
In addition to giving appreciated stock, Laughton said donors are using donor-advised funds as a strategic tool along with private foundations. With funds like Schwab Charitable, the donor can give anonymously to nonprofits, while when private foundations make a grant, “it’s part of the public record.
“’Private’ foundations are a bit of a misnomer,” she said, since those foundations must, like other tax-exempt organizations, file form 990-PFs with the IRS on which they list the foundation’s grant recipients. With Schwab Charitable, through a Web interface, donors can decide on a case by case basis whether or not they want to be publicly recognized as donors by the charity.
As for advisors, Laughton noted that for Charles Schwab Corp., “the advisor business is an extraordinary part of Schwab’s overall business; our strategy is to make sure that advisors see us as part of the offerings they can provide clients, to make it easy.”
Part of how Schwab Charitable makes it easy is to provide expert help to advisors when their clients want to donate items such as restricted stock associated with IPOs. After the items are donated, she said that advisors these days are choosing to invest the proceeds in more alternative strategies such as private equity and hedge funds in order to make those assets last longer and thus provide grants to charities over a longer time.
As for overall giving trends, Laughton said that some two-thirds of all charitable is nondiscretionary, i.e., donors will provide that amount of giving every year to their chosen religious, healthcare or education charities, regardless of market conditions. Only about a third of giving is discretionary, and even during recessions charitable giving–notably that nondiscretionary portion–doesn’t get cut.
See Investment Advisor Editor John Sullivan's video interview with Laughton shot during the Schwab Impact 2011 conference in November.