Gifts to charity from donor-advised funds grew 27 percent in 2014 to reach $12.5 billion, as assets in fund accounts reached an all-time high, according to a study released today.
Donor-advised funds held $70.7 billion in assets last year, an increase of nearly 24 percent, says the study of 1,016 donor-advised funds offered by financial companies, community foundations, and other nonprofits. The study was conducted by the National Philanthropic Trust, which has $2.6 billion in donor-advised fund assets under management.
The funds, which allow donors to earmark money for charity, receive a tax benefit and later decide which nonprofits will receive grants, continued to be an attractive vehicle of charitable giving, the study found. Donors poured $19.7 bllion into accounts last year, a 14.1 percent increase over 2013.
Grants from donor-advised funds managed by community foundations increased the most in 2014, surging 40.7 percent over the previous year to total nearly $4.2 billion. That rate of growth does not include the 175 percent grant increase reported by the Silicon Valley Community Foundation.
The $12.5 billion the funds gave charities equals a payout rate of 21.9 percent. That is lower than in 2010, when the payout rate was 24.7 percent. Even with the decline, however, it’s higher than the 5 percent requirement of private foundations.
“People aren’t waiting to accumulate a lot of assets” in the funds, said Eileen Heisman, president of the trust. “They’re actually granting pretty quickly.”
Among the study’s other findings:
- Some 238,293 donor-advised fund accounts were in existence last year, up from 218,993 in 2013.
- The average size of each account grew from $260,626 in 2013 to 296,701 last year.
- National donor-advised fund organizations, most of which were created by financial-services firms, attracted the most new donors. The total number of accounts held by national funds was 128,195, a 13.1 percent increase.
- Funds offered by Jewish federations, universities, and other nonprofits had a 33.2 percent payout rate. That was a slight decline from 2013, but still higher than national funds (21.4 percent) and community foundation funds (18.2 percent).
Calculating Payout
Philanthropy experts do not agree on the best way to calculate payout rates from donor-advised funds. For instance, the National Philanthropic Trust reached its rate by dividing the assets that funds held at the end of 2013 with total grants they made in 2014. Fidelity Charitable, the nation’s largest donor-advised fund manager, used a similar calculation but used the average of its assets over the previous five years instead of one year’s total. In a report in July, Fidelity said its payout rate was 28 percent.
In a study of 2012 donor-advised fund activities, Paul Arnsberger, a senior statistician at the Internal Revenue Service’s Statistics of Income Division, took the grant totals and divided them by the sum of the grants and the aggregate value of donor advised funds at the end of the year. Using that method, he concluded that the median payout rate was 7.2 percent and that a fourth of donor-advised fund organizations paid out less than 1 percent to charity.
