By nearly every metric, donor-advised funds continue to grow at a rapid clip, according to a new annual analysis by National Philanthropic Trust.
Donor-advised funds took in $37.1 billion in 2018, up 20.1 percent from $30.9 billion in 2017. Contributions to those funds accounted for 12.7 percent of individual charitable giving in 2018, up from 10.5 percent in 2017, according to the report.
Total assets under management in donor-advised fund accounts increased 8.3 percent, to $121.4 billion, in 2018, up from $112.1 billion in 2017. Grants from donor-advised funds grew by nearly 19 percent, rising to $23.4 billion in 2018 from $19.7 billion in 2017.
However, the payout rate for donor-advised funds declined to 20.9 percent of total charitable assets in 2018, down from 22.8 percent in 2017.
Eileen Heisman, president and CEO of National Philanthropic Trust, said the continued growth of donor-advised funds is probably the result of changes in tax law that took effect in 2018, as well as a mostly strong economy in 2018, despite year-end volatility in the stock market.
“When I saw these numbers so robust, I thought that — even with December being so difficult — the rest of the market fluctuation was mostly on the upside,” she said.
The effects of the tax law may have motivated contributors to donor-advised funds to “bunch” their contributions for maximum effect, said Heisman. (She also noted that the study examines the fiscal year 2018, which for many organizations may not be the calendar year.) If anecdotal evidence of bunching is accurate, she said, then growth in contributions to donor-advised funds could slow down next year, while contributions from those funds would rise.
The National Philanthropic Trust is one of the nation’s largest donor-advised-fund sponsors.
More Account Holders
The number of donor-advised fund accounts also jumped sharply in 2018, rising 55.2 percent, to 728,560, in 2018, from about 469,330 in 2017. Much of that growth is attributable to a small number of donor-advised fund sponsors who have begun to use the accounts in novel ways, such as vehicles for employee giving programs through “micro” donor-advised funds.
One such group is American Online Giving Foundation Inc., a donor-advised fund sponsor that works with — and shares the same executive team as — Canadian payment processor and workplace-giving software provider Benevity. The group was established in 2016. In 2017 it reported $125.8 million in contributions and $124.8 million in grants from 145,322 accounts. In 2018, by comparison, it reported $598.6 million in contributions and $589.8 million in grants, from 352,550 accounts.
In less than three years, the foundation has become one of the largest donor-advised fund sponsors in the country, though the average value per account is about $25. “The idea that somebody could get a payroll deduction and have that go into a giving account is becoming more attractive,” said Heisman.
As a result, the average size of donor-advised fund accounts has dropped from about $238,860 to $166,650.
“It’s the nature of the model. We’re not appealing to the high-net-worth donor that wants to generate a large tax deduction in one year and see the yield of that amount go to charities over time,” said Bryan De Lottinville, president and CEO of Benevity and of the American Online Giving Foundation. “Our model is very much in real time, if you will. It’s $100 in and $98 out.”
Most contributions to donor-advised funds flows into 54 national sponsoring organizations, which took in $23.4 billion in contributions, a year-over-year increase of 24 percent.
Community foundations sponsoring donor-advised funds took in $8.4 billion in contributions to those accounts in 2018, a 15.4-percent increase over 2017. Traditional, cause-focused charities saw $5.4 billion in contributions in 2018 to donor-advised funds that they sponsor, an 11.7-percent increase over 2017.
