Introduction to Schwab Charitable™

Introduction to Schwab Charitable™

Schwab Charitable™ is an independent, 501(c)(3) public charity with a mission to increase charitable giving in the United States by providing a tax-smart and simple giving solution to donors and their investment advisors. A Schwab Charitable donor-advised fund account can be a valuable wealth-planning tool that enables clients to give more strategically.

Key features related to Schwab Charitable accounts:

  • Minimize capital gains taxes through contributing appreciated, non-cash assets held for more than one year.
  • Unlock the value of clients' non-cash assets such as real estate, private equity, and other appreciated assets or investments in support of their charitable-giving and estate-planning goals.
  • Receive a same-year tax deduction*, for those who itemize, on contributions to the account and recommend grants to charities over time.
  • Continue a legacy of giving beyond the donor's lifetime by adding successors to the account or adding charitable beneficiaries.

Key information related to Schwab Charitable accounts:

  • The integration of the Schwab Charitable Center advisor online platform, within Schwab Advisor Center®, makes it easy for you to manage your clients' giving. You can link your clients' charitable accounts to a Schwab master account.
  • Individuals and families can open a core account with no minimum contribution. After the initial contribution, they may make contributions in any amount. All contributions are irrevocable. Grants as small as $50 can be made to the charitable organization of their choosing.
  • For core accounts, contributions can be invested in one or more of our investment pools. For balances of $100,000 or more, a professionally managed account allows you to develop a custom investment strategy with Schwab Charitable or use separately managed accounts and alternative investments for higher asset levels.
  • Facilitate online grant recommendations on behalf of clients based on your account privileges.
  • Typically, accounts are open and funded within 24 hours from the receipt of your client's contribution.
  • Schwab Charitable can assist donors who wish to make international grants by working with charitable intermediaries to facilitate giving outside of the United States. If you have a donor interested in international grant making, contact Schwab Charitable directly to discuss at 800-746-6216.
  • For tax purposes, contribution acknowledgements can be accessed when logged in to the account.
  • The Charitable Legacy Program is available to clients interested in supporting charitable organizations over time after their lifetime.

*A donor's ability to claim itemized deductions is subject to a variety of limitations, depending on the donor's specific tax situation. Donors should consult their tax advisors for more information. 

Donation of appreciated non-cash assets
As an advisor, you can help your clients unlock the value of their appreciated, non-cash assets and investments such as restricted stock, post-IPO stock, privately held business interests, cryptocurrency, and real estate in support of their charitable-giving and estate-planning goals, while potentially eliminating capital gains taxes from the sale of these assets.

Private foundation conversion services
For clients who are looking for lower costs, greater grant-making privacy, and less administrative burden, Schwab Charitable can help by:

  • Providing tools and advice to help you and your clients determine the best charitable vehicle or a combination of vehicles for their philanthropic needs
  • Working with you on all issues associated with transitioning your clients' private foundation to a Schwab Charitable account or by adding a Schwab Charitable account to help support the mission of an existing private foundation
  • Assisting with the transfer of private foundation funds to a Schwab Charitable account

Below you will find a side-by-side comparison of the goals and advantages of donor-advised funds and private foundations and their tax considerations. In many situations, using both options may be the most effective approach to meeting your clients' charitable goals.

Giving vehicle comparison

 Donor-advised fund (DAF)Private foundation
Recordkeeping and administration
  • The DAF is responsible for all administration, including recordkeeping, reporting, and compliance with state and federal regulations as well as tax filings.
  • The DAF is responsible for all granting and charity due diligence.
  • Secure donor site allows for simple grant recommendations, account contributions, and charity research.
  • Foundation is responsible for financial reporting, annual audit, recordkeeping, and state and federal tax and regulatory filings.
  • Foundation is responsible for all granting due diligence.
  • All risks and liabilities are assumed by the foundation.
  • Mission statement and annual meetings are required (minutes must be recorded).
Donor control and granting flexibility
  • The DAF assumes asset ownership and liability.
  • Grants are permissible to U.S. 501(c)(3) public charities or their equivalent.
  • International granting may be allowed.
  • Scholarships are permissible through a 501(c)(3) organization but the donor may not specify the individual recipient.
  • Donors cannot receive personal benefit in exchange for a grant to charity.
  • A DAF cannot grant to a private foundation.
  • Multi-year gifts, pledges, and grant agreement capabilities are available.
  • Foundation retains control of assets.
  • Grants are permissible to 501(c)(3) charities but the foundation is not limited to IRS-qualified charitable organizations.
  • Grants are permissible to individuals and international non-governmental organizations (NGOs).
  • Loans to charities are permitted.
  • Scholarship programs are available and individual recipients may be specified.
  • Payments to self or family members as employees are permissible.
  • A private foundation can grant to a DAF.
Cost
  • Administrative fees apply.
  • Investment management fees may apply.
Schwab Charitable average daily balanceSchwab Charitable annualized administrative fees
First $500,0000.60% of assets
Next $500,0000.30% of assets
Next $1,500,0000.20% of assets
Next $2,500,0000.15% of assets
Next $5,000,000 0.13% of assets
Next $5,000,0000.12% of assets
$15,000,000+0.10% of assets


Note: This fee schedule is only for Schwab Charitable accounts and fees for other donor-advised funds will vary.

  • Excise tax of 1.39% on net investment income is mandatory.
  • Staff costs may apply.
  • Investment management fees may apply.
  • CPA and attorney fees may apply for establishing and administering the foundation.
Gift deductibility

Typically, fair market value (FMV) deductibility applies to assets held for more than one year up to:

  • 60% of adjusted gross income (AGI) for cash
  • 30% of AGI for non-cash assets held longer than one year

FMV for cash and securities and the lower of cost basis or FMV for private property or other privately held assets apply for assets held for more than one year up to:

  • 30% of AGI for cash
  • 20% of AGI for non-cash assets held longer than one year
Investment complexityFor accounts over $100,000 (managed by an investment advisor), ETFs, mutual funds, and securities are acceptable; higher balances allow for private investments.Specifics are detailed in the investment policy statement.
Annual minimum distribution requirementAnnual minimum distribution requirements vary based on the sponsoring organization's policies.There is an annual minimum distribution requirement of 5%, which may include certain grant-making expenses as well as the value of the grants themselves.
TechnologyWeb and mobile granting may be available; multiple account holders, each with individual login, may be able to recommend grants, view history, manage recurring grants, export transaction history, and view letters and statements.Additional foundation administration resources may be needed to institute and manage technological capabilities.
PrivacyThe sponsoring charity files an aggregate return that does not detail specific donor names or transactions of individual fund accounts.Form 990-PF must be filed annually, giving comprehensive information about the foundation including all grant recipients and amounts; the form must be made available to the public.

Both Schwab Charitable and community foundations support grantmaking to IRS-registered 501(c)(3) public charities. However, there are key differences between them and, in some situations, using more than one giving vehicle may be the most effective approach.

 Schwab CharitableCommunity foundation
DescriptionSchwab Charitable is an independent 501(c)(3) public charity that makes it easier and more tax-effective for clients to give by offering them the flexible giving solution of a donor-advised fund account. Schwab Charitable facilitates grant recommendations to 501(c)(3) public charities on behalf of donors.A community foundation is a tax-exempt public charity typically serving a geographically defined area that may administer a number of fund types, including donor-advised funds, and facilitates grant recommendations to 501(c)(3) public charities on behalf of donors.
Knowledge of local opportunities and community needsSchwab Charitable's focus is on facilitating donor-driven philanthropy—Schwab Charitable remains cause neutral.The community foundation is a subject matter expert regarding the particular causes it supports and charities that deliver the services.
Donor relations/ grant-making supportA donor relations team is dedicated to client service, including account initiation, contributions, grantmaking, and complex account solutions.1 A team of specialists is dedicated to charity due diligence and grant processing. Custom and multi-year grant agreements are available.Donor support may also provide grant-making guidance and community connections for donors. Complex account solutions and family philanthropic planning expertise may also be available. The foundation may provide charity research and due diligence, grant processing, and annual reporting of specific results.
Grant acknowledgementDonors may be acknowledged with a special name capability and custom grant award letter or remain anonymous—this capability can be tailored by the donor for each grant request.Donors may be acknowledged or anonymous. The ability to customize acknowledgement varies by foundation.
InvestmentsSchwab Charitable offers a choice of investment pools, or professional management by an independent investment advisor for accounts with assets greater than $100,000.Investment programs vary by foundation and may or may not include investment pools and professional management by an independent investment advisor.
TechnologyWeb and mobile granting are available.2 Multiple account holders, each with individual login, may recommend grants, view history, manage recurring grants, export transaction history, and view letters and statements. Schwab Charitable donor-advised fund accounts can be integrated online with other Schwab accounts.Web accessibility and online experience vary by foundation.
Oversight and complianceBecause Schwab Charitable handles fiduciary financial and investment oversight, required reporting, and tax filing, compliance with all federal and state regulatory requirements is ensured.Because the foundation handles fiduciary financial and investment oversight, required reporting, and tax filing, compliance with all federal and state regulatory requirements is ensured.
SuccessionAccount holders may name successor donor-advisors and charitable beneficiaries and/or participate in the Charitable Legacy Program. Donors may designate successors in perpetuity.Account holders may name successor donor-advisors. Succession may be limited or restricted; charitable beneficiary options vary by foundation.
Administrative fees
Schwab Charitable average daily balanceSchwab Charitable annualized administrative fees
First $500,0000.60% of assets
Next $500,0000.30% of assets
Next $1,500,0000.20% of assets
Next $2,500,0000.15% of assets
Next $5,000,0000.13% of assets
Next $5,000,0000.12% of assets
$15,000,000+0.10% of assets

Note: This fee schedule is only for Schwab Charitable accounts and other donor-advised funds will vary.

Varies by foundation; fee schedules generally start at 1% or more. Administrative expenses may be higher than with a nationally provided donor-advised fund in order to cover the cost of hands-on philanthropic guidance and connections.
Minimum account sizeNo minimumMinimums vary by foundation.
Gift deductibility

Typically, FMV deductibility for gifts of assets held more than one year up to:

  • 60% of AGI for cash
  • 30% of AGI for non-cash assets held longer than one year

Typically, FMV deductibility for gifts of assets held more than one year up to:

  • 50% of AGI for cash
  • 30% of AGI for non-cash assets held longer than one year
Ability to receive and sell private assets and real propertyOutright gifts and remainder interests of real property and private assets are commonly accepted, held, and/or liquidated via a third-party partner (cost for contribution is negotiated case by case).1The ability to receive real property and private assets varies by foundation. The cost for contribution varies by foundation.

1. Contributions of certain real estate, private equity, or other illiquid assets may be accepted via a charitable intermediary, with proceeds of the donation transferred to the donor-advised account upon liquidation. This intermediary considers donations on a case-by-case basis.
2. Requires a wireless signal or mobile connection.

Is Schwab Charitable related to Charles Schwab & Co., Inc.?
Schwab Charitable is an independent 501(c)(3) public charity established with the support of Charles Schwab Corporation and is governed by an independent board of directors. Charles Schwab & Co., Inc. and its affiliates provide certain investment management, administrative, and recordkeeping services to Schwab Charitable.

How are my client's Schwab brokerage and Schwab Charitable accounts linked?
You can see your client's Schwab Charitable accounts on Schwab Advisor Center®, just as with Schwab brokerage accounts.

Your clients can view their Schwab Charitable account activity, provide grant recommendations, and complete other account-management tasks on schwaballiance.com or through the Schwab Mobile app, just as they can with any of their other Schwab accounts. Contributions of appreciated assets from a Schwab brokerage account to a Schwab Charitable account can be transferred online, with the funds normally available for grant recommendations in three to five business days.

What does it mean to "recommend" a grant?
Tax laws require that a charitable contribution must be irrevocable and unconditional in order for your clients to receive the associated tax benefits. Any assets contributed to Schwab Charitable belong to Schwab Charitable and you and your clients have relinquished control of them. Over time, and at their convenience, clients recommend grants to the IRS-qualified charities of their choice. With the correct permissions, your role as an advisor allows you to make grant recommendations on behalf of your clients.

Can I invest my client's assets in investments other than the Schwab Charitable investment pools?
If your client's Schwab Charitable account balance is $100,000 or more and they elect to have you professionally manage their account, you can actively manage the assets of the account and invest in a broad range of securities, including individual stocks, bonds, and mutual funds. For accounts not using the professionally managed account feature, your clients can designate that you receive additional online access, which allows you to recommend the rebalancing of assets among the investment pools and recommend grants on your client's behalf. You may also receive correspondence on the account—such as quarterly account statements and contribution receipts—at your client's request.

Can I add a successor or beneficiary on my client's account?
Advisors may not designate account successors and charitable beneficiaries for a Schwab Charitable account. However, clients may name individuals who may succeed to the account as account holders when the clients are no longer able to, or no longer want to remain account holders.

Clients may also designate charitable organizations as beneficiaries, and the account balance will be distributed to those charities when the clients are no longer able to, or no longer want to remain account holders. If no succession plan options have been selected, or if no recommended charitable beneficiary is eligible at the time the recommendation would take effect, Schwab Charitable may elect to distribute the balance of the account to a charity or charities in the account's recent grant history. At its discretion, Schwab Charitable may also transfer the account balance to The Philanthropy Fund, which makes charitable grants and sponsors educational programs that encourage giving. Account holders may also contribute directly to The Philanthropy Fund at any time.

Succession decisions can be made at the time of account open and added or changed at a later time by completing the Schwab Charitable Update Succession Plan form.

What kind of assets can my clients contribute?
Clients can contribute cash and publicly traded securities, including stocks, most mutual fund shares, and bonds. Cash contributions must be made in U.S. dollars and delivered by check or wire only. Contribution forms are available on Schwab Advisor Center.

Schwab Charitable is also able to accept proceeds from tax-deductible contributions of post-IPO stock, restricted stock, real estate, private equity fund investments, cryptocurrency, privately held business interests, fine art and collectibles. These contributions are accepted through an intermediary with proceeds of the donation transferred to the donor's account upon liquidation. This intermediary considers donations on a case-by-case basis.  Call Schwab Charitable for more information at 800-746-6216.

How does Schwab Charitable determine the fair market value of my client's contribution?
Generally, fair market value (for purposes of the charitable contribution deduction) is determined on the date that contributions are received by Schwab Charitable. In the case of contributions of stock, fair market value is the average of the high and the low for the day that the assets were received by Schwab Charitable. In the case of contributions of mutual funds, fair market value is the closing price on the date of receipt. Securities are typically liquidated the following business day after receipt, so the fair market value for tax purposes may be different from the amount of sales proceeds credited to the account.

In the case of non-cash assets that are not publicly traded, the donor must obtain a qualified appraisal to determine fair market value.

How to use a Schwab Charitable donor-advised fund account
How to make charitable donations
How to open a Schwab Charitable account

See the following tools and resources to assist you with Schwab Charitable:

Information about contributing specific asset types
Fact sheets
Resources
  • Candid is a third-party provider of nonprofit organization information that enables you to search its database to find and evaluate charities for potential grant recommendations.
  • Advisor Stories and Donor Stories help you start the conversation with your client about opening a Schwab Charitable account and donor-advised funds.
  • A Better Way to Give (Schwab Charitable brochure) and Schwab Charitable Program Policies provide an insightful overview of Schwab Charitable donor-advised fund accounts.
Educational videos
Contact informationContact Schwab Charitable at 800-746-6216 or your Schwab Charitable Consultant for assistance with questions about Schwab Charitable, contributing complex assets, or converting a private foundation. If your firm does not currently have relationship with Schwab Charitable, contact the Schwab Charitable Business Development team at 855-966-3764 or give@schwabcharitable.org.


Additional answers may be found in the Frequently Asked Questions section of the Schwab Charitable website.

*Do not send non-public information through unsecured email channels.

The Charles Schwab Corporation and its affiliates do not provide specific individualized legal or tax advice. Please consult a qualified legal or tax advisor where such advice is necessary or appropriate.
 
Schwab Charitable is the name used for the combined programs and services of Schwab Charitable Fund, an independent nonprofit organization. Schwab Charitable Fund has entered into service agreements with certain affiliates of The Charles Schwab Corporation (Charles Schwab & Co., Inc. and Charles Schwab Investment Management, Inc.) to perform administrative, recordkeeping, and investment management services.

Schwab Charitable Fund is recognized as a tax-exempt public charity as described in Sections 501(c)(3), 509(a)(1), and 170(b)(1)(A)(vi) of the Internal Revenue Code. Contributions made to Schwab Charitable Fund are considered an irrevocable gift and are not refundable. Please be aware that Schwab Charitable has exclusive legal control over the assets you have contributed. Although every effort has been made to ensure that the information provided is correct, Schwab Charitable cannot guarantee its accuracy. This information is not provided to the IRS.

Market fluctuations may cause the value of investments held in a donor-advised account to be worth more or less than the value of the original contribution to the funds.

A donor's ability to claim itemized deductions is subject to a variety of limitations depending on the donor's specific tax situation. Schwab Charitable does not provide specific individualized legal or tax advice. Please consult a qualified legal or tax advisor where such advice is necessary or appropriate.

Contributions of certain real estate, private equity, or other illiquid assets may be accepted via a charitable intermediary, with proceeds of your donation transferred to your donor-advised fund account upon liquidation. Call Schwab Charitable for more information at 800-746-6216.

A donor opening a professionally managed account must recommend an independent investment advisor, who, if approved by Schwab Charitable, will manage the assets contributed to the account. Advisors must meet certain eligibility requirements, including working with Schwab Advisor Services™, a business segment of The Charles Schwab Corporation, and agree to the Investment Advisory Agreement, which is available on schwabcharitable.org. 

Candid is not affiliated with Charles Schwab & Co. Inc. or Schwab Charitable™

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