Despite fears of a recession, many may give more to charity

With persistently high inflation, stock market volatility and recession fears, it’s easy to see why some Americans might limit charitable giving.

But some donors may have eyed bigger gifts for 2022 due to this economic uncertainty, according to research by Fidelity Charitable, a nonprofit that allows investors to donate to a charitable investment account through a so-called donor-advisory fund.

Nearly 75% of respondents said they were concerned about other community members, and 64% were worried about nonprofits as the recession loomed. As a result, according to the survey, which surveyed 969 donors for the nonprofit in July and August, 59% of donors may be willing to donate more this year.

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According to Giving USA, individual Americans gave an estimated $326.87 billion to charity in 2021, a 4.9% increase from the previous year.

While the organization forecast 2022 to be “a robust year” for giving, it also emphasized the link between philanthropy and the strength of the stock market. The report came as the stock market neared record highs in December, but the S&P 500 is down more than 20% year-to-date.

Funds recommended by donors can make giving easier

While some donors are uncertain about 2022, it may be an easier choice if you already have money in a donor-recommended fund that offers an upfront donation and the ability to select recipients over time, said certified financial planner David Foster , Founder of Gateway Wealth Management in St. Louis. A donor recommended fund is a charitable account for future donations.

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“You’ve already made that decision,” he said. “Now it’s just a little faster.”

In fact, 67% of donors reported giving more to charity than they would have done without a donor-advised fund, the Fidelity Charity Studies show and 57% have used their account to “respond to an emergency or disaster situation.”

However, if someone has not transferred money in advance, new donations for 2022 may be less than previous years due to lower income or lower account balances.

“In my experience, people still give about the same percentage of their income or wealth,” Foster said. “It’s just that their incomes and wealth have gone down because of the economy.”

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“There’s just less wealth to give away,” he added.

While donor-endorsed funds are a popular option, older investors can also consider what are known as qualifying charitable distributions, or QCDs.

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These are direct gifts from an IRA to an eligible charity. If you’re 70½ or older, you can give up to $100,000 per year, and this may count as the required minimum distribution once you turn 72.

“There are relatively few circumstances where that would not be the first source of giving if you are over 70½ years old,” Foster said.

Although QCDs do not allow for a charitable deduction, the referral is not counted as part of your adjusted gross income, which can result in higher Medicare Part B and Part D premiums.

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