Donor-advised fund grants exceed $19B

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Grants from donor-advised funds to charities grew 19.9 percent to a record amount of $19.08 billion last year, with an increased payout rate of 22.1 percent, according to a new report, as donors made charitable contributions in anticipation of the new tax law.

The annual report, from the National Philanthropic Trust, the biggest independent donor-advised fund in the U.S., found the total amount of charitable assets in DAFs surpassed $110 billion this year.

DAFs remain the fastest-growing charitable giving vehicle in the nation, with the number of accounts surging 60.2 percent to 463,622. DAFs now represent 10.2 percent of all individual giving in the U.S. The total assets available for grantmaking increased 27.3 percent year-over-year to $110.01 billion, while contributions to DAF accounts, every dollar destined for charities, grew 16.5 percent to $29.23 billion.

The new tax law may have spurred many charitable donors to speed up their contributions and maximize the charitable deductions they could claim. “Growth in donor-advised funds reflects the charitable instinct of Americans, who are among the most generous donors in the world,” said National Philanthropic Trust president and CEO Eileen Heisman in a statement. “Tax reform drove many to ‘pre-fund’ their philanthropy in 2017 when the value of their tax deduction could be higher. A booming stock market and a tense political climate spurred generosity and helped donors support the values and causes they embrace.”

The report saw growth in all key metrics for the eighth year in a row. Assets destined for charitable grant-making in all DAF accounts amounted to $110.01 billion, a 27.3 percent jump, compared to $86.45 billion in 2016. DAF assets surpassed the $100 billion mark for the first time and continued the momentum they have shown since 2010.

Grants from DAF accounts to qualified charities totaled $19.08 billion in 2017, a 19.9 percent increase, compared to $15.91 billion in 2016. The grant payout rate to qualified charities was 22.1 percent in 2017, compared to 20.6 percent in 2016. Donor-advised funds continue to have a payout rate nearly four times higher than that of private foundations.

Contributions to DAFs totaled $29.23 billion in 2017, a 16.5 percent increase compared to $25.09 billion in 2016. DAF accounts in the U.S. totaled 463,622 in 2017, a 60.2 percent increase compared to 298,628 in 2016.

Nevertheless, there was a drop-off in one important area. The size of DAF accounts averaged $237,356 in 2017, but that was a 20.5 percent decrease compared to $298,628 in 2016. Historic growth in number of DAF accounts resulted in this decrease.

“Growth in grants from DAFs to charities—large and small—have outpaced contributions for four out of the last five years,” said Heisman. “The 2016 to 2017 period saw the fastest rate of growth in DAF grantmaking in several years. We predict that grants from DAFs to charities will exceed $20 billion in 2018. We believe that DAF donors give more and are fully committed to philanthropy. To attract DAF dollars, charities should communicate their mission to prospective donors with impactful stories and innovative fundraising tactics.”

For the first time, the annual report includes a brief analysis of the types of assets contributed to donor-advised funds. The limited data set compiled represents 61.5 percent of the total contributions in 2017. Of those, approximately 60 percent were non-cash assets.

“The vast majority of non-cash asset contributions are publicly traded securities, but we also see donors turning their business interests, real estate, fine art and jewelry into charitable capital,” said Heisman. “We saw an increase in these illiquid asset contributions six years ago. DAFs make it easier for donors to turn these assets into charitable grants for the organizations that mean most to them. We anticipate contributions of illiquid assets will continue to increase in the coming years.”

Even though DAFs have been around for nearly a century, they have evolved in recent years into an important giving vehicle for donors and steady funding source for charities.

“We are in the midst of a transformative era in the history of philanthropy,” said Heisman. “The surge in number of individual DAFs reflects donors’ interest in being active and strategic with their philanthropy. Many DAFs offer the opportunity to align their charitable capital with their financial goals and personal values. For example, donors are starting to choose impact investments for their DAF contributions to double the impact of their philanthropy. We are seeing emerging, innovative models that capitalize on the efficiency and flexibility of DAFs, including crowdfunding and workplace giving. This evolution of giving means new opportunity for donors and charities alike.”

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Donor-advised funds Philanthropy Charitable deductions Wealth management