News and analysis
December 20, 2011

Donor-Advised Fund Grants Inch Up in 2010

The nation’s donor-advised funds held nearly $30-billion in assets last year, an increase of more than 12 percent from 2009, a new report finds. But the $6-billion the funds distributed to charity didn’t grow nearly so fast, rising by just 1.3 percent last year.

Donor-advised funds allow people to put money into a charity account, get an immediate tax deduction, and then make grants to any nonprofit any time they want.

The funds continue to grow in popularity: Donors contributed $7.7-billion to them last year, 25.3 percent more than they gave in 2009, according to the study, by the National Philanthropic Trust. The trust, which manages donor-advised funds, controlled assets of more than $646-million in 2010.

The study examined data from 478 charities, commercial banks, and community foundations, all of which manage the investment of donor-advised fund assets.

The trust found that donor-advised funds distributed 17 percent of their assets to charitable causes in 2010. Eileen Heisman, chief executive of the trust, said the percentage of dollars awarded grew by a relatively small amount, compared with the influx in dollars, in part because some donors may have been “doing a little bit of hoarding” due to the tough economy.

And, she notes, people have always wanted to put money aside one year and then wait for a while to decide what causes they most want to support. During the time a donor’s fund is active, all the money he or she has contributed is invested, in the hopes that it will grow bigger over time and eventually more money will be available to give away.

Political Debate

The issue of how much donor-advised funds distribute each year has caused disagreements between the Obama administration and a key Republican lawmaker who thinks federal regulations are needed to ensure people don’t just stockpile assets in the funds so they can get a tax break.

A new Treasury Department report issued this month said no regulations were needed, because donors have been giving plenty away. But Sen. Charles Grassley, a Senate Republican, says he wants to know how many of the donor-advised funds give nothing each year.

Ms. Heisman said her group’s findings support the idea that no regulations are needed. She notes that donor-advised funds are already disbursing a bigger share of assets than federal law requires of private foundations, which must distribute at least 5 percent of their endowments annually.

She said she hoped her findings put concerns to rest. “We’re a powerful tool to get money to these charities,” she says.