Contributions to donor-advised funds totaled a record $17.28 billion in 2013, up some 23.5 percent over the previous year, a report from the National Philanthropic Trust finds.
According to NPT's 2014 Donor-Advised Fund Report, an annual analysis of data from more than a thousand charitable organizations that administer donor-advised funds, contributions to DAFs represented about 5.2 percent of all charitable gifts in 2013, while grants awarded by such funds totaled $9.66 billion, a 12.6 percent year-over-year increase and also a record high. The report also found that the DAF payout rate fell, to 21.5 percent, down from 22.5 percent in 2012 and 24.7 percent in 2010.
According to the report, total assets managed by DAFs in the U.S. grew 19.8 percent on a year-over-year basis, to $53.74 billion; the number of DAFs grew 5.7 percent in 2013 and has increased 34 percent over the last seven years, making donor-advised funds the fastest-growing giving vehicle in the country; and the average size of a DAF account grew 13.4 percent on a year-over-year basis, reaching a record high of $247,217.
The Chronicle of Philanthropy notes that contributions increased significantly at funds managed by national charities and organizations affiliated with financial firms such as Schwab and Fidelity. The aggressive marketing efforts of such firms, extensive media coverage, and the ease of opening a DAF account online — in some cases aided by a widget called DAF Direct — also has helped attracted donors. "Americans like tools and gadgets that make their lives easier," said NPT president Eileen Heisman. "Donor-advised funds are an extension of that. They’re the iPhone of the philanthropic world."
Critics of DAFs point out that while private foundations must comply with the federally mandated 5 percent distribution requirement, the payout rate for DAFs — which provide an immediate charitable tax deduction but impose no distribution requirement on donors — does not accurately reflect the funds that sit dormant, for years at a time in many cases, in donor-advised funds. "A 20 percent payout rate doesn't overly impress me," Alan Cantor, a fundraising and nonprofit management consultant, told the Chronicle.
Heisman expects the payout rate to be up in 2014 and said the dip in 2013 was likely due to the increase in new accounts and contributions, fueled in part by a tax policy debate in Congress that raised the specter of a cap on charitable deductions. A new Congress, the Chroniclereports, is likely to take up a proposal to require DAFs to distribute their funds within five years, although prospects for the proposal's passage are slim.