Charitable giving continues upward trajectory

Two charitable arms of asset management firms recently reported record-breaking generosity among their donors, indicating the upward trajectory of charitable giving during the pandemic is continuing.

Fidelity Charitable, an independent public charity, announced earlier this week that donors recommended $10.3 billion in grants in 2021, which represents a 41% increase from pre-pandemic levels. In late January, Vanguard Charitable, a nonprofit organization, said its donors granted more than $1.78 billion in 2021, its fifth straight year of record giving and a 6% increase from 2020.

Fidelity reported an increase in giving for “emergency situations,” such as the refugee crisis in Afghanistan and natural disasters around the world. Vanguard said donations focused on hunger and housing.

“The phenomenal giving we saw from Fidelity Charitable donors in 2020 continued to grow in 2021, showing us that this increase in generosity is a sustainable trend,” Fidelity Charitable President Jacob Pruitt said in a statement.

Vanguard Charitable President Rebecca Moffett provided a similar take. Last year “brought new challenges to our nation, and our donors once again increased their generosity to a wide range of deserving nonprofits,” Moffett said in a statement.

Marianela Collado, chief executive of Tobias Financial Advisors, has seen an upward trajectory in charitable donations among her clients. She attributes it to a giving spirit and tax pressures.

“It’s like the perfect storm,” Collado wrote in an email. “Clients are facing extraordinary tax liabilities resulting from a variety of transactions ranging from the sale of highly appreciated real estate, the sale of their business and stock sales. When they are looking for tax mitigation strategies, we turn to charitable gifts. They’ve always had philanthropic goals and having a monetization event is the perfect time to pair with charitable giving.”

Kerrie Debbs, a partner at Main Street Financial Solutions, has noticed a strong charitable giving inclination among people in her community. She said the sweet spot for giving is those who are in their peak earning years but have not yet hit retirement.

“Charitable giving is in very good shape,” Debbs said. “People in their 50s and early 60s, I call it the crank-it-out-years, are the people who are willing and most able to do it. There’s a wave just before that [retirement] age group.”

Both Fidelity Charitable and Vanguard Charitable are major sponsors of donor-advised funds, which are becoming the most popular way to make donations.

In a so-called DAF, investors can make contributions of cash or appreciated assets — such as public securities, private stock, real estate or art — that qualify for a charitable tax deduction. Once assets are in the fund, investors can make grants to the charities of their choice over a number of years.

Collado said DAFs are a good option for investors who want to give to a number of organizations.

“What I am finding is that they may not have one particular charity in mind or are still exploring areas in their community where they want to have the biggest impact, so they turn to donor advised funds to make those donations and lock in the current year deductions but have the freedom to decide down the line” where to distribute them.

Donating non-cash assets through DAFs is another charitable trend. For instance, Fidelity reported that donors gave $331 million in digital assets in 2021, compared to $28 million in 2020.

“Many of our contributions are non-cash assets, which are then liquidated into funds for granting — a tax-efficient strategy many donors are embracing in a rapidly change economy,” Fidelity’s Pruitt wrote in a letter accompanying the organization’s giving report.