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Financial Planning > Charitable Giving > Donor Advised Funds

Fidelity Charitable Gift Fund Reports Record Q1 Giving

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Fidelity Charitable Gift Fund reported a record amount of first-quarter contributions and grants to nonprofits this year. In an announcement on Thursday, Gift Fund announced that contributions were up 25% over the first quarter of 2010, to $269 million, and first-quarter grants to nonprofits recommended by donors reached $293 million, up 8%. Both the number of “outgoing grants” and the total dollar amount granted were the highest in any first quarter of Gift Fund’s 20 years of existence.

While many clients may make their charitable gifts in the last quarter of the year as part of year-end tax planning, the rise in first-quarter giving may indicate that this is changing. Other clients, who are developing a strategic plan for their philanthropy, may consider giving as an opportunity to work with children, grandchildren or other family members and to bring to the forefront a family’s mission and values.

This presents a wonderful opportunity for wealth managers to work with clients, tying giving plans into estate planning and family and legacy wishes. While some clients may want to use a private foundation as their philanthropic vehicle, others find that donor-advised funds (DAFs) are a very easy-to-use and robust vehicle for strategic giving. They are easy to set up, and can be funded with asset amounts ranging from a few thousand dollars to hundreds of millions of dollars.

Clients can use appreciated assets to fund their DAF, and, unlike a foundation, clients don’t have to file a tax return each year and don’t need a board when using a DAF. With a DAF, donors can grant out the assets to nonprofits anonymously if they wish. Grants from a DAF can be made all at once or over time. Amounts contributed to a DAF give the donor a tax deduction in the year they are contributed, regardless of when the money is granted out. Gift Fund is the largest DAF in the U.S., according to the release.

“Donor momentum is very strong for this point in the year,” said Fidelity Charitable Gift Fund President Sarah Libbey (left) in the announcement. “Many of our donors responded to the tragedy in Japan with disaster relief and related grants, yet the level of overall activity indicates that more people are prioritizing charitable giving, making it part of their overall financial planning, and not just a year-end activity.”

“The earthquake and tsunami in Japan spurred donors to provide more than 3,515 grants totaling $4.2 million,” as of March 31, according to the announcement.

Appreciated Assets

The Gift Fund announcement also stated that a higher proportion of donors are funding their DAFs with appreciated securities: “donations of appreciated securities [rose] to 60% of total contributions, up from 46% in 2010 and 27% in 2009, due in large part to the rebounding stock market.”

“We are seeing a significant increase in donors leveraging a broader spectrum of their assets, such as restricted stock and privately held securities, for charitable purposes. This reflects continued strength in the mergers and acquisitions market, and also is a sign of more strategic charitable planning on the part of donors and their advisors,” Libbey added in the announcement. “This is an exciting trend, as these types of assets have powerful tax advantages and donating them to a donor-advised fund like the Gift Fund makes the process easy and typically more financially advantageous for the receiving charities.”


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