Jacob Pruitt is the president of Fidelity Charitable, the nation’s largest donor-advised fund.
For someone who is new to donor-advised funds, what do they do and how do they work? They’re similar to an investment account. You put money or other assets into an account, and if you itemize, you can claim the tax deduction up front. You have the ability to invest your money in a variety of mutual funds, including funds that focus on environmental, social and governance (ESG) issues. Then you identify an IRS-approved 501(c)(3) nonprofit you want to support. Fidelity Charitable can accept a variety of assets, including publicly held stocks, bonds and mutual funds, shares in privately held companies and private-equity firms, and restricted stock. We’ll convert those assets to cash and put them in your charitable giving account. Even if you don’t itemize, giving an appreciated asset to a donor-advised fund provides a tax benefit because you may eliminate paying taxes on capital gains you’ve accumulated through the years.
This giving season, what advice do you have for people who want to get the most out of their charitable dollars but are concerned about the impact of inflation and a recession on their family budgets? I would encourage them to continue to give if they can. The need for nonprofits is there regardless of the economic environment. They’re under pressure from a multitude of factors, including stock market volatility and inflation. In these challenging times, people have to be even smarter about how they give and make sure that they do their homework. We’re asking our donors who typically contribute to continue to give, and they have. Year to date, we’ve seen about $4.8 billion in grants, an increase of about 11% over the same period last year. Our donors put money in early on and now they’re picking the causes that they want to support. That’s the beauty of a donor-advised fund: Because you have put the money into the account during positive market conditions, it becomes a ready reserve to draw on even during economic downturns.
Where are donors directing their grants this year? We are seeing dollars go to a variety of categories. About $28 million in contributions have been taken out of Fidelity Charitable to support Ukraine. Organizations that support food security are definitely getting contributions from the fund, along with educational, religious and health organizations.
Many people donate appreciated securities to donor-advised funds. Has the bear market led to a decline in those contributions? Obviously, the market has impacted donations of appreciated securities. What we’re seeing is that individuals are picking the right assets to donate. They’re rebalancing their portfolios …….