Heather Ehlert
Vice President of Client Services

As fundraisers and nonprofit managers, we know donor-advised funds (DAFs) have become a very popular – albeit somewhat controversial – giving vehicle in philanthropy. Their role in shaping the charitable landscape continues to grow, as evidenced by recent data reported by both commercial and community foundations about their donor-advised funds in 2017.

Fidelity Charitable, for example, has operated as an independent public charity since 1991 and currently sponsors the nation’s largest DAF program. It is also the nation’s second-largest grant maker, behind the Bill & Melinda Gates Foundation. In its recently released 2018 Giving Report, Fidelity Charitable shared the following information and insights about the behavior of its nearly 180,000 donors in 2017:

  • There were more than 1 million donor recommended grants, a 25% increase over 2016
  • Donor recommended grants totaled $4.5 billion, a 27% increase over 2016
  • Donor recommended grants went to 127,000 different nonprofits in every state and around the world
  • Individual grants of $1 million or more grew to 505 last year, a 25% increase over 2016
  • 30,000 new donors established more than 21,000 new Giving Accounts

Fidelity Charitable also shared some of the factors behind this DAF activity:

  • Donors gave appreciated assets, such as stocks, which often allows them to give more to charity than by donating cash; non-cash assets made up 61% of 2017 contributions
  • Non-publicly traded assets, such as restricted stock, limited partnership interests and real estate valued $916 million in 2017 donations to Fidelity Charitable
  • Cryptocurrency (such as bitcoin) saw a nearly tenfold increase in usage over 2016 with $69 million in donations; this helps donors eliminate significant capital gains taxes on the appreciation while giving the full fair market value to charity

Donor-advised funds are the fastest-growing way to give in the United States, as illustrated by Fidelity Charitable data: the number of Giving Accounts held at Fidelity Charitable has more than doubled in the last decade and grew 20% between 2016 and 2017. And DAFs are not exclusively for the wealthy: the median account balance at Fidelity Charitable is $19,157, with more than 50% of the accounts having balances under $25,000. The money isn’t necessarily sitting, either. Fidelity Charitable reports donors are actively recommending grants to charities from their Giving Accounts: within five years of a $100 contribution to Fidelity Charitable, $74 has been granted to charities. After 10 years, $88 has gone to charities and only $12 remains to be granted.

Not surprisingly, 2017 saw an emphasis in donor giving from Fidelity Charitable Giving Accounts in response to natural disasters. The American Red Cross made the top of the charity recipients list and Samaritan’s Purse made the list for the first time. The Salvation Army, Habitat for Humanity, Oxfam and UNICEF also say increases in giving, most likely due to natural disasters, especially those that happened in late 2017. Impact investing was also noteworthy in 2017 – Fidelity Charitable made more than 4,000 donor recommended grants totaling nearly $19 million. Donors are also requesting more frequently that their Giving Account balances be invested in Fidelity Charitable’s impact-investing pool.

There are certainly clear advantages to using donor-advised funds: flexibility, convenience, investment growth, tax benefits and empowering strategic charitable giving and financial planning.

And of course, there’s the flip side to DAFs:  costs to society in tax revenue, oversight and payout requirements, treatment of sponsoring organizations versus community foundations and the overall impact on donors, nonprofits and other forms of giving.

Most importantly, nonprofits should position themselves to work with and benefit from this giving vehicle. DAFs aren’t going away. So don’t forget some basic DAF best practices:

  • Flag the DAF and gifts in your donor database
  • Recognize the donor in stewardship, not the DAF sponsor
  • Seek to engage the donor, even if the initial gift is small
  • Be sure to include DAFs in your organization’s “Ways of Giving”

Don’t miss The Giving Institute’s Live Webcast of “The Data on Donor-Advised Funds: Insights You Need to Know.”  You can expect to have your most pressing questions about donor-advised funds and how to incorporate this giving vehicle into your fundraising plans answered.

Thursday, March 1
1:00-2:30pm Central
Register Here

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