Charitable giving through donor-advised funds at Schwab Charitable is well on its way to doubling compared to last year due in part to possible changes in tax laws, according to Schwab Charitable, a national donor-advised fund.
As of Oct. 30, Schwab Charitable says it experienced a 74 percent increase in charitable giving over the year-earlier period. And the holiday season, when many people traditionally make donations, is yet to come.
Kim Laughton, head of Schwab Charitable, says the increased activity and expected record levels of giving are attributed to individuals looking to reduce their estate sizes and tax burdens ahead of anticipated changes in the U.S. tax code.
Donor-advised funds allow contributions to be made to the fund now and let donors make grants to a particular charity at a later date. Schwab Charitable account sizes range from $5,000 to $500 million.
There are five ways to lessen tax burdens by making contributions before the end of the year, according to Schwab Charitable.
First, making contributions now can reduce an estate's size before estate taxes rise and exclusion amounts drop, which may happen at the beginning of the year.
Second, donating highly appreciated assets to charitable accounts now will offset taxes from capital gains rates that may go up in the future.
Third, some proposals to cap itemized deductions starting next year could reduce the income tax benefits of future charitable gifts. Making the gifts now avoids that possibility.
Fourth, for individuals who are converting a traditional IRA to a Roth IRA, charitable giving now can help offset the taxes resulting from the conversion.
Fifth, donating to a non-taxable charitable account can enable tax-free growth of the fund to support future giving.
Schwab Charitable posits that advisors who bring philanthropy into the financial planning conversation can build more substantial relationships with clients.
“When advisors are helpful in providing clients with simple and tax-effective ways to support the causes that are important to them, it opens up much more personal conversations and builds tremendous loyalty,” says Laughton.