Donor-advised funds in the U.S. have been on a roll during the past five years, their number tripling and grants to charities from DAFs nearly doubling, National Philanthropic Trust reported this week.
Grants from DAFs in fiscal 2018 grew by 18.9% to a record $23.4 billion, according to NPT’s latest annual report. Total DAF assets available for grantmaking increased to $121.4 billion, up 8.3% from fiscal 2017.
Contributions to DAF accounts, intended to be used for charitable purposes, grew by 20.1% to $37.1 billion, representing 12.7% of all individual giving in the U.S., NPT reported, citing data from 2019 Giving USA.
“This is the first Donor-Advised Fund Report that fully captures donors’ response to tax reform and its implications for charitable giving in December 2017, before the new laws were enacted,” NPT’s president and chief executive Eileen Heisman said in a statement.
“Contributions to DAFs outpaced grants for the first time in four years, which may indicate donors choosing to ‘bunch’ their giving — essentially pre-funding several years of charitable giving to make their philanthropy more tax effective. We can’t yet predict a definitive trendline, but it is clear DAFs are a philanthropic solution that many donors chose in response to the new tax laws.”
NPI examined 2018 IRS Form 990 filings by 989 national charities, community foundations and other charities that sponsored DAFs.
According to the annual report, DAF accounts in the U.S. increased by 55.2% from 2017, making them the fastest growing charitable giving vehicle in the country, while their payout rate to qualified nonprofits fell from 22.8% to 20.9% in 2018.
How do these numbers compare with those of private (non-corporate) foundations in the U.S.?
DAFs totaled about 728,560 last year, nine times more that the estimated 80,000 independent foundations, according to the report. At the same time, DAFs’ grants of $23.4 billion amounted to about 43% of foundations’ $54 billion.
The size of DAF accounts in 2018 averaged $166,653, down by 30.2% from $238,857 in 2017. NPI explained that two years of historic growth in number of DAF accounts resulted in this decrease.
Looking ahead, the report predicted that DAF charitable grantmaking would continue to grow at a consistently high rate. It said that donors who had “bunched” their funding may now have several years’ worth of assets in their accounts and may continue to grant from them at a high rate.
NPI also said it expected emerging DAF models to figure significantly in the number of individual accounts, driving down the average DAF account size. These new models include workplace giving that uses DAFs and low- or no-minimum accounts.
DAFs “are adaptable for both new and seasoned donors’ goals, blending traditional and emerging models of philanthropy,” Heisman said.
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