By: Ashlea Ebeling
November 12, 2013
In the staid world of charitable giving, what's the hottest charitable giving vehicle out there these days? Donor-advised funds-once the poor man's version of a private foundation. More people are setting them up; contributions are up; the average account size is up; and grants from the funds to charity are up.
"The question we will have to answer next year is: will we have a new normal at these heightened levels?" asks Eileen R. Heisman, president of the National Philanthropic Trust in the 2013 Donor-Advised Fund Report released today.
Here's a snapshot of how they're reaching all-time highs:
•Donor-advised funds grew to hold $45.35 billion in assets in 2012, up from $38.14 billion in 2011.
•The number of accounts reached 201,631, having steadily risen from 160,415 accounts in 2007.
•The average account size reached $224,921, an increase of 11.2% over 2011.
•Contributions totaled $13.71 billion, an increase of 34.6% over 2011.
•Grants out to charities reached $8.62 billion, up 6.7% from 2011.
Why did folks flock to these funds in 2012? One possible reason reported is that donors were concerned about proposed tax law changes that would put limits on the charitable deduction. "Some donors may have elected to 'pre-give' in order for their contributions to qualify for the known deduction, rather than risk the unknown," the report says.
That's the main selling point of donor-advised funds. You get to claim a tax deduction for your charitable contribution for the year you contribute to the fund, and then you recommend grants out to your favorite charities at your leisure.
You generally need to be ready to give at least $5,000 at the outset to set up one of these charitable kitties. They're offered at the charitable arms of major brokerages like Fidelity, Schwab and Vanguard as well as at community foundations and even some universities. The report gathered data from 1,007 charities that sponsor donor-advised funds.
One slice of data was somewhat perplexing--a small drop in the payout rate, the amount of grants going out of the funds. For 2012, the payout rate at donor-advised funds was 16%, down from 17.5% in 2011. (There's no required payout rule for donor-advised funds; by contrast, private foundations have a 5% payout rule.)
The National Philanthropic Trust report suggests that the disconnect between rapid asset growth and modest changes in grant making could be because many donors made contributions in late December 2012 as Congress and President Barack Obama debated limits on the charitable deduction. More than half of the charities in the report have a June 30 fiscal year end so the donor-advised fund data would not have captured the surge in year-end 2012 giving. Next year's report will likely show that accelerated giving, and perhaps consequently accelerated grant making.