As the recovery takes hold, the nonprofit world may be seeing glimmers of hope in the contributions into the Fidelity Charitable Gift Fund, says Sarah C. Libbey, its president.
For the third year in a row, the Fidelity Investments fund, the nation's largest donor-advised portfolio, has granted out more than $1 billion.
In addition, Libbey said in a recent interview, "incoming contributions … are up 9%" so far this year, compared to the same period in 2008. "That was a very positive sign," she said. Compared to last year, contributions and new accounts are both up significantly, and the fourth quarter of 2009 was one of the strongest periods in two years, she said.
The donor-advised fund model lets a wealthy investor spread out philanthropic giving more easily, Libbey said. "Helping you get organized about your giving is the main benefit," she said. "Over 67% of our donors say they give more" because they are using the fund model. "You have a giving account with a financial statement."
Investors can log on to their accounts, monitor where their dollars go and adjust the amounts. As a result, their philanthropic desires get "integrated into their financial pictures," Libbey said.
"Philanthropy is really important to people," she said. "They want to stay true to their commitments to giving."
Charitable giving has made something of a comeback so far this year after nonprofit organizations saw donations falter during the recession. The median gift was $41.4 million last year, compared to $69.3 million in 2008 and $74.7 million in 2007, according to The Chronicle of Philanthropy, which monitors charitable giving. With Wall Street indexes improving, however, and economic indicators pointing toward a recovery, the outlook for giving has turned up.
In the first quarter, the Fidelity Gift Fund made grants of $270 million. Money donated to help Haiti in the wake of the January earthquake that devastated the nation has kept Libbey's staff busy.
Wealthy investors, moreover, want not only to give to their favorite causes but also to make the most of certain tax advantages.
"Donating cash, certainly, is great, but donating appreciated securities is really good," Libbey said. "You're donating in kind and avoiding the capital gains tax."
Some 47% of contributions to the Fidelity fund in the first quarter were of appreciated securities, compared to 27% the year earlier. Fidelity has made tax advisers, estate planners and money managers for high-net-worth investors more aware of this tax advantage.
This year, the gift fund is also talking to financial advisers who are considering shifting clients' assets into a Roth IRA. "There is a tax cost to doing this," Libbey pointed out. An investor would have to pay taxes this year on the amount that he or she converts. One way to reduce the tax is to make a larger charitable contribution, boosting the tax deduction. A larger gift helps offset the tax expense of the Roth conversion.
"For advisers to differentiate themselves," she said, "they should do that analysis." Fidelity has a group working with financial advisers on this charitable offset.
Since the gift fund's inception 19 years ago, it has distributed more than $9.5 billion to more than 130,000 nonprofit groups nationwide. Fidelity recently reduced the minimum investment to $5,000 and the grant minimum to $50.