International giving is on the rise. It now represents about 5% of all giving, approximately double what it was 10 years ago, according to Ken Nopar, a Chicago-based consultant who advises wealth managers on philanthropic matters.
But many countries don’t vet charities the way the U.S. does, making it more difficult to get favorable tax treatment when donating to an overseas charity. That's spurring many advisors, and their clients, to consider donor-advised funds (DAFs) as a vehicle that can help them make a long-term impact internationally -- whether that's by contributing to a school in Malawi, or to aid for victims of a typhoon in the Philippines or an earthquake in Haiti. Fidelity Charitable, which operates the nation’s largest DAF program and is associated with Fidelity Investments, is providing guidance to donors who want to help fight Ebola in West Africa.
'EXTRA DUE DILIGENCE'
Not all sponsors of donor-advised funds make direct international grants. Some use a third party to process foreign grants, while others don't allow them at all.
"If you want to give internationally, be sure your DAF's charitable sponsor can facilitate it," advises Eileen Heisman, executive vice president of National Philanthropic Trust, one of the largest grant-making institutions in the U.S., which administers DAFs on behalf of clients. "International grants require extra due diligence to ensure foreign charities are legitimate, which takes time and money. To cut down on fees and grant-making turnaround, consider giving to the same foreign charity more than once, because it has already been approved."
Through the first three quarters of 2014, Fidelity Charitable made nearly $18 million in international grants via U.S intermediaries and its direct international grant program. American Education Foundation, a DAF based in Hudson, Ohio, said the pace of its giving program is increasing rapidly. It recently became affiliated with C.A.F. America, an independent U.S. 501(c)(3) public charity whose mission is to increase the flow of charitable donations outside the U.S.
Donors can also explore whether their favorite foreign charity has an American 'Friends of' chapter, or find a U.S. charity that has international operations. That allows donors to make a grant to a U.S.-based 501(c)(3), while still supporting an international charitable cause, says Heisman.
Some U.S. community foundations also facilitate international grants. The largest of these, Silicon Valley Community Foundation, with some $6 billion under management, made grants totaling $13 million to international charities in 2013, according to the foundation.
"We make it simple for donors to recommend grants to international nonprofits," says Mari Ellen Loijens, chief business, development and brand officer for the foundation. "We also maintain a global charity database of vetted nonprofit organizations that anyone can use to make charitable gifts internationally."
Of the $13 million donated by Silicon Valley Community Foundation to international charities last year, 9% came out of the foundation's DAFs, and 28% was from corporate-advised funds. Approximately 62% came from the foundation's supporting organizations, and 0.3% came from other funds held by SVCF.
Bruce W. Fraser, a New York financial writer, is a contributor to Financial Planning.