Charles Schwab & Co.'s charitable giving division is usually in the business of donations, not ten-yard downs. And yet, in 2005, the division briefly found itself in the odd position of being part owner of the Minnesota Vikings. A client had decided to give up his stake in the team and punt it into a donor-advised fund.

A football team?

"We received this phone call from a financial advisor who says he's got a client who owns a portion of the Vikings and wants to liquidate it," says Schwab Charitable's president Kim Wright-Violich. "And he would like to use that to fund a charitable gift account. But he doesn't know if it's possible. So we say we think it is possible."

Schwab contacted an expert who focuses on difficult-to-value assets. "Of course, a portion of the Minnesota Vikings you can't pick up with your hands," Wright-Violich continues. "It's not traded on a stock exchange, so valuing it is a bit more complex. You can't go online and determine instantly what its value is."

Schwab's caveat to the advisor was that, in such a case, the company would want a buyer identified and already on hand (so that the company is not managing the team). The client then transferred the title to the donor-advised fund, which then turned around and sold it to the new buyer. "That cash funds the donor's charitable gift account, and they make grants out of it for as long as they like."

And it's not just those types of assets. Often it's real estate. Or it could be a racehorse. Or even a seat on a mercantile exchange (something else Schwab has taken on). Stuff that's a lot headier than taking old dungarees and dropping them off at the Salvation Army.

Charitable giving has changed a lot. Though some of the assets may be odd, what's sometimes more interesting is the way that more people are giving online-rating the charities they use themselves, tracking how the dollars are spent to see their money at work and getting their families involved.

Changes in the law have also made giving more interesting, and sometimes more frustrating. With the Pension Protection Act of 2006 donors could, for a while at least, take $100,000 out of their IRA tax free if they were over 70½ and put that directly into a charity. But that option changed back into a pumpkin at the beginning of 2008 and is no longer available, even though proponents are lobbying Congress to renew it. Other parts of the act were less kind, such as the one that curtailed some fractional giving rules, thus creating a freeze on the donation of paintings to museums. Another thing that took a hit was certain kinds of supporting organizations, which became prohibited for granting to under the act.  

"We had clients who may have been giving to their favorite alma mater via supporting organizations," says Page Snow, a senior vice president at Foundation Source, "and it was a huge surprise to them that they could no longer give to these organizations."
Snow says she's sure that donors who weren't given some sort of screening apparatus were running afoul of the law.

More Giving Than Ever

People may be currently watching the tax laws and biting their nails at a thought of recession, but even amid such crises in the past, charitable giving has been redoubtable. According to Giving USA, a publication written by the Center on Philanthropy at Indiana University, Americans gave $295.02 billion in 2006, and this is 2.2% of GDP, higher than the 40-year average of 1.8%.

Wright-Violich says that usually during recessions, the giving merely slows, but rarely retreats, the exception being 2000. "It did go down in 2000 to the 1998 levels and then climbed back up," she says.

"In the broader population we're seeing more people participating in the giving experience as a whole, with almost 80% or 90% of our population giving," says Elizabeth Snyder, director of philanthropy in the family wealth advisory practice at GenSpring Family Offices. "I think more and more people through technology and social networks are really participating in the process."

There have been some worries that the death of estate taxes would sap the will to give. Or that a looming recession might in the short-term lower the value of appreciated assets, which kills one of the tax incentives for donations (since giving appreciated items such as stock and real estate is much more preferable from a tax standpoint then simply scrawling out your name on a check). But people who were charitably inclined already for the most part continue to be generous. It has helped that altruism has become chic and trendy.

"Bill Gates and Warren Buffett kicked off quite a movement," says Gavin Morrissey, director of advanced planning at Commonwealth Financial Network in San Diego. "That's why foundations are picking up. That was the best thing that ever happened for foundations."

Making A Difference In A Smarter Way

Still, according to a study Schwab performed, financial advisors often do not raise the subject of charitable giving with their clients, either because they think it's too personal or they don't feel comfortable with how much they know. And some planners say it's important to raise the question, otherwise you're doing a disservice to clients.

Barry Glassman, senior vice president with Cassaday & Co., in McLean, Va., has been involved in charitable fund-raising for more than 20 years, ever since high school, when he and other classmates came together for a friend with a brain tumor who later died during his freshman year at Dartmouth.

"His friends at various schools started up an organization called Campuses Against Cancer," Glassman says, "and we helped provide a lot of the initial funding for the organization that is now the Brain Tumor Society ...  and I currently sit on the national board." Glassman also co-chairs an annual 5K run called the Race for Hope held the first Sunday in May, which last year hosted 6,600 runners and raised $1.5 million. He also cooks $100-a-plate dinners himself (OK, with help) for clients and colleagues to raise money for the cause.

Glassman works with high-net-worth individuals who have $5 million to $50 million. For those with philanthropic interest, he says nowadays it's more important to clients to see the impact of the dollars themselves. Philanthropists are also interested in getting their children and families involved-to allow them to control some of the money so that they can see the value of a dollar in a whole new light.

"What most people [have] done in the past, myself included, was to have the children pick a handful of stocks, or give them stocks," says Glassman. "Here's a stock in Disney or here's a stock in Nike to have them put on their wall and track in the newspaper. And that works for about six weeks. Then the child goes back to his normal practice of reading the comics. I've found a much greater impact when the parent has a discussion about philanthropy with their children, and even letting them control dollars to those in need. By owning 40 shares of Nike, it really doesn't teach a child or teen about the value of a dollar. But knowing that $500 can change a family's life suddenly has a much greater impact on his Xbox game purchase."
One thing he does is has his clients come up with mission statements. "This is something typically done at the largest foundations and endowments," he says. "What makes my practice unique is that I'm constantly looking at what the family office environment has-the Rockefellers, Rothschilds and so forth-and bringing that down to those folks with $50 million or under in net worth."

Often that means starting from scratch and rethinking the way that the client has been giving, and plumbing the family's underlying goals to root our the real mission more effectively. One family, he says, parlayed a rather fuzzy desire to prevent cruelty to animals into an elementary school education program that brought abused animals into the classroom. Another man who had been throwing off thousands of dollars to his alma mater for a scholarship that would help only one or two students realized that with the same amount of money he could help 20 students at a community college elsewhere. And that served his real mission-to get as many people into college as possible.

Tracking the dollars and rating the charities has become more important if the clients want to see their dollars make a difference. If there's been a hurricane or a tsunami and donors rush out to give, they tend to bristle if they find out later that their gift went to set up a phone system.

Snyder points to many small trends that are giving a large boost to charitable giving, including online platforms and Web sites that allow users to rate the charities the same way Amazon.com rates books.

"One of the most difficult problems for donors is how to find good organizations to fund," says Snyder.

Donor-Advised Funds Vs. Private Foundation
    Identifying charities is hard enough, but then there's the question of how best to give it away: Should you put it in a donor-advised fund? Or a charitable remainder trust or charitable lead trust? Or perhaps set up a private foundation?

The donor-advised fund, the fastest-growing vehicle, is the relatively new kid on the block. These funds generally are 501(c)(3) public charities that hold the funds of donors as separate accounts, and the money is invested and allowed to grow over time, and then throws off money as the donor advises. The largest is run by Fidelity, which had $4.8 billion in its fund at the end of January, according to Sarah Libbey, the interim president of Fidelity Charitable Gift Fund. Though the fund makes available pools of mutual funds, the managers themselves can also manage the money themselves in a separate program. Schwab also has such a program.

"These investment advisors are realizing that they need to accommodate the charitable giving needs of their investors as they're producing financial plans, and they also know that some of their investors prefer to have them as their money manager," says Fidelity's Libbey. "So yes we have found that increasingly popular as an offering."

Some planners, however, argue that donor-advised funds don't offer as much flexibility, since the giver is not technically in control of the dollars anymore, and that they are also difficult to get out of. "As for donor-advised funds," says planner Stephen Barnes, with Barnes Investment Advisory in Phoenix, "that's a hot area, [but] we've heard from a lot of clients and other acquaintances about a number of hassles going down that route. They are a real hassle to get out of once you start. You want to be sure that's what you want to do forever." He suggests sometimes it is enough to just go directly to the charity.

Another option is for a client to set up a private foundation. These used to be considered the private preserve of the ultra-rich, but technology and new players in the market have brought them down from the nosebleed realms to within reach of people with a lot less money.

Says planner Matthew Chope, a CFP licensee with The Center for Financial Planning, a Raymond James affiliate in Southfield, Mich., one of the great breakthroughs has been "how easy it is to establish ... a charitable foundation." Just ten years ago, he says, you could spend $10,000 just to establish the foundation, "and now it's practically free. You can save the $10,000 and put it in the foundation."

It has become somewhat easier in part because of turnkey foundation services like those offered by Foundation Source and Renaissance LLC.  "I think that one of the things that financial advisors used to recommend was that unless you have $5 million, don't bother setting up a private foundation, set up a donor-advised fund," says Snow. "And I think what's happening now is that because the setup charges aren't that expensive and the actuarial management fees are analogous to a donor-advised fund, there's no reason why you can't set up a private foundation."

Snow says her firm can get them started for as little as $250,000. She finds that a lot of clients want to road-test it first, to put in a quarter or half a million bucks, to see if it works-and see if the kids will get involved and the family will collaborate. You can even get the filtering services of the database that Foundation Source provides to look through its charity database to see which charities are OK as far as the IRS is concerned.

Still, because of administration, compliance and tax issues, many people are still wary of foundations, saying they are too big a beast to baby-sit, even if different services have made it easier. Also, donor-advised funds offer more anonymity.

"We've had a number of clients look at setting up their own foundation," says Dan Moisand of Spraker, Fitzgerald, Tamayo & Moisand in Melbourne, Fla. "So far we have not had any implemented. They decided that they didn't need that kind of control or that kind of headache."

"In the past," says Snyder, "I got a lot of questions about what's the magic dollar figure to establish a private foundation versus a donor-advised fund. And we would say that there isn't [one]. Typically the industry has said 'a million' and we might say even higher than that to make it worth your while from a cost perspective and compliance perspective."

She adds, however, that increasingly it's not a question of either/or. Very often, the high-net-worth clients at GenSpring are cutting the Gordian knot and asking for both.  

Glassman says it depends on the goals of the clients. If the family were going to give away all the dollars over the next five years or so, then a donor-advised fund might be the ticket.

"Now for something starting out with half a million, [if the family anticipates] adding $200,000 a year for the next 20 years and the goal is to set it up for the kids and grandkids to have a family foundation, then a family foundation makes sense. It really depends on the dollars put out and the longevity anticipated."