Donor-Advised Funds Nearing Double Digits

Giving to donor-advised funds and grants given through them climbed to records last year, according to the latest annual report on donor-advised funds.

The 2016 Donor-Advised Fund Report, released Tuesday by National Philanthropic Trust (NPT), revealed that DAF grants to nonprofits grew 17 percent in 2015, from $12.42 billion to $14.52 billion. Contributions hit another all-time high of $22.26 billion – making up 8.4 percent of the $264.58 billion in charitable giving by Americans last year.

The 10th annual report by NPT cited significant growth in every metric for the fifth consecutive year:

  • DAF grants to qualified charities reached a record $14.52 billion, up 16.9 percent from 2014, furthering a double-digit annual payout rate of 20.7 percent;
  • Total charitable assets in all DAFs totaled $78.64 billion, up 12 percent from $70.27 billion and continuing double-digit growth every year since 2010;
  • Contributions to DAFs increased 11.4 percent, from $19.98 billion to $22.26 billion;
  • The number of accounts increased 11.1 percent, from 242,390 to 269,180;
  • The average size of a DAF account reached a record $235,727, up 8.8 percent from $216,760;
  • Grant payout rates were about 20.7 percent (based on grant dollars divided by charitable assets at the end of the prior year, multiplied by 100 to reach a percentage).

The rate of growth for the number of individual DAFs, contributions and assets was highest at national charities. Payouts rates were highest at single-issue charities while average account sizes were highest at community foundations.

National charities make up the bulk of accounts, contributions, grants and charitable assets, often as much as community foundations and single-issue charities combined. For instance, contributions were $12.77 billion to national charities, followed by community foundations, $5.33 billion, and single-issue charities, $3.97 billion.

Grants from DAFs at national charities rose almost 30 percent, to $7.05 billion, compared to 9.4 percent at single-issue charities ($4.14 billion) and 3 percent at community foundations ($3.34 billion).

The report primarily uses data from Internal Revenue Service (IRS) Form 990 filings to provide analysis of the DAF market. This year’s report examined 1,016 charitable organizations that sponsor donor-advised funds, including national charities, community foundations and other sponsoring charities.

“Today’s donors are highly engaged in their giving. Baby Boomers and Millennials in particular want a close connection to their philanthropy and to track their charitable impact,” said Eileen Heisman, CEO of Jenkintown, Pa.-based National Philanthropic Trust.

“The shift in philanthropic strategies, from a dated federated funding model to contemporary DAFs has occurred in the last 25 years. Similar to the Greatest Generation handing over the reins of the economy, the growth in popularity of DAFs is an example how generations have shifted their approach to giving in America,” she said. “The next generation wants to be closely connected to their philanthropy, which is reflected in the double-digit growth of DAFs,” she said.

Grants from DAFs increased more quickly in 2015 than average over the previous five years, a trend that’s expected to continue, according to Heisman. “DAF accounts outnumber private foundations by 3-to-one and we also predict this trend will continue as donors grow more knowledgeable about using DAFs to implement their charitable vision,” she said. Illiquid asset donations are an increase source of philanthropy, she said, from complex securities and hedge funds to real estate and antiques.

To access the full 2016 Donor-Advised Fund Report, visit https://www.nptrust.org/daf-report/