Five percent of all charitable dollars donated in 2014 went to donor-advised funds (DAFs). That $17.28 billion figure is slightly greater than the total amount given to the entire Arts, Culture and Humanities sector. Since its 2009 nadir due to the recession, total annual donations to DAFs have grown by 86 percent, and the number of DAF accounts has grown by 21 percent, to where they now outnumber foundations by a ratio of 3:1.
Clearly, then, fundraisers owe it to themselves and their organizations to be knowledgeable about DAFs—how they work, how to get their share of the gifts, and how to work with donors who have them. Fundraisers will have the opportunity to learn more about DAFs at the upcoming Gurin Forum. The purpose of the Gurin Forum, hosted by The Giving Institute, is “to bring attention to timely issues facing the sector” and “stimulate dialogue, debate, research, and education.” The topic for the free session (which is also live-broadcast) on November 13 is “The Future of Donor-Advised Funds.” You can register here.
At a basic level, a DAF allows the account holder to make a contribution, receive a tax benefit, and recommend grants to organizations of his or her choice without regulations regarding payout. While the vehicle has been around for many years—the first fund was at the New York Community Trust in 1931—DAFs have taken off in recent years as major financial management companies such as Fidelity, Schwab and Vanguard have established affiliated charities to sponsor them. Today, those three charities manage $6.39 billion in charitable assets.
While the facts about DAF growth are plain, our field is still learning how to adjust to this new reality. One of the questions the Gurin Forum will answer is: Can charities adapt to donors’ shifting giving behaviors? What exactly are these behaviors? How does this impact giving decisions? Simply put, DAFs are quickly becoming a preferred giving vehicle for donors. There are a number of reasons behind this, including:
- DAFs allow the donor more time to decide where to give while still receiving a tax benefit
- Assets intended for charity can be invested and grow
- Record-keeping is simple and organized
- DAFs accept complicated, non-cash assets
- It is possible to be entirely anonymous
- DAFs are less costly than foundations