Donor-advised funds grew by almost every measure in 2020, according to a report from the National Philanthropic Trust.
And the amount donors sent to charities from those funds reached $34.7 billion, a 27-percent increase from 2019.
Contributions to donor-advised funds grew as well. The total in 2020 added up to $47.9 billion, a 20.1-percent increase from 2019.
Total charitable assets held in donor-advised funds grew to $159.8 billion, a nearly 10-percent increase over 2019.
The nearly $48 billion received by donor-advised funds is roughly equivalent to the amount of cash and stock raised by the 85 biggest organizations on the America’s Favorite Charities list, and is equivalent to roughly 10 percent of Giving USA’s estimated $471 billion donated to all charities in 2020.
“It’s the largest grant-making increase we’ve had in a decade,” said Eileen Heisman, CEO of National Philanthropic Trust, which with $4.9 billion in contributions last year is the second-biggest sponsor of donor-advised funds, after Fidelity Charitable. “People were using their DAFs to quickly respond to a crisis not just in their backyard, but around the country and the world.”
The trust examined donor-advised-fund data from 976 sponsors, which it says account for more than 95 percent of all such funds in the United States Its findings have become key in policy debates about how to best regulate donor-advised funds.
Donor-advised funds are essentially charitable checking accounts. People put money in the funds and get an immediate tax deduction. They can distributed the funds as they wish.
Calls for Regulation
The increasing popularity of donor-advised funds and their growing asset values, coupled with the lack of a payout requirement, have spurred calls for new regulatory policies.
In the Senate, Chuck Grassley, a Republican of Iowa, and Angus King, a Maine independent, proposed a measure that would create new classes of donor-advised funds designed to encourage donors to give more speedily. Under the measure, donors could get an immediate tax deduction if they pledge to distribute the funds within 15 years. Or they can delay the tax benefit until the funds are distributed, with a 50-year time limit to do so.
Only a few donor-advised funds account for the majority of 2020’s contributions. The five largest donor-advised fund sponsors — Fidelity Charitable, National Philanthropic Trust, Schwab Charitable Fund, Vanguard Charitable Endowment, and the Silicon Valley Community Foundation — raised roughly $24.5 billion in 2020, more than half of the total amount contributed to such funds last year.
The National Philanthropic Trust’s report said payouts reached highs not seen since the Great Recession. Using a formula from Candid’s Foundation Center — dividing the value of current-year grants against prior-year assets — the report notes that donor-advised funds had a payout rate of nearly 24 percent in 2020, up from 22 percent in 2019. The rate peaked in 2010 at 24.6 percent of prior-year assets.
Another method of calculating the payout rate, dividing current-year grants against the end-of-same-year value of assets and grants, also reached highs not seen in a decade, with the 2020 rate rising to 17.8 percent. That’s up from 2019, when it measured 15.8 percent. This measure peaked at nearly 19 percent in 2008.
Heisman, the trust’s CEO, noted that donor-advised fund sponsors reported payout rates many times higher than the 5 percent that private foundations are required to meet. The report estimated that private foundations had $1.1 trillion in assets in 2020 but distributed only $63.6 billion that year. The total of $34.7 billion from donor-advised funds in 2020 amounted to a much larger slice of assets.
“Private foundations have seven times the assets, but we’re giving half the amount they are in the same period of time,” said Heisman. “Our donors are giving out much more aggressively than private foundations.”
