Donor-Advised Fund Grants Surging Amid Pandemic

Donor-advised funds grew in all key metrics for the 10th consecutive year, according to the 2020 annual DAF report published Tuesday by National Philanthropic Trust, an independent public charity that manages donor-advised funds.

NPT also published the sector's first review of DAF donors' response to the coronavirus pandemic, which it said found historic donor philanthropy.

2020 DAF Report

The 2020 DAF report covers the 2019 fiscal year, which began as early as July 1, 2018, for some sponsors, and ended as late as Dec. 31, 2019. Researchers examined 993 charitable organizations that sponsor DAFs, using data from IRS Form 990 filings.

"The 2020 Donor-Advised Fund Report reflects heightened philanthropic engagement, financial market fluctuations, increased interest in illiquid asset contributions and longer-term impact of the Tax Cuts and Jobs Act of 2017," Eileen Heisman, NPT's chief executive, said in a statement.

The value of grants from DAF accounts to qualified charities totaled $27.4 billion in 2019, up 15.4% from 2018. This was the first year grants from DAFs exceeded $25 billion and the second year they exceeded $20 billion.

Since 2010, value of grants to qualified charities from DAFs has increased by 199%.

Contributions to DAF accounts, which are irrevocable and destined for qualified charities, increased to $38.8 billion from $36.1 billion in 2018.

Charitable assets in all DAF accounts totaled $142 billion, a 16.2% increase from 2018. The report noted that continued growth of charitable assets under management reflects increases in the number of DAFs, contributions from donors and investment gains.

In the past 10 years, the number of DAF accounts in the U.S. grew by almost 300%, and in 2019 totaled 873,228. The increase came as giving accounts with lower contribution minimums appeared in the workplace, the report said.

The value of DAF accounts averaged $162,556, down 2.7% from 2018. NPT said that as donor-advised funds continue to grow in popularity and the number of accounts increases, the average account value decreases.

The DAF grant payout rate to qualified charities increased to 22.4% in 2019, compared with 21.2% the year before. According to the report, the payout rate has exceeded 20% for every year on record, demonstrating that DAF donors are a consistent, sustainable resource for charitable giving.

DAF Pandemic Grantmaking Survey

Researchers conducted a survey among 13 DAF sponsors using self-reported data at the end of 2020. Collectively, this group represents about 50% of total DAF charitable grant dollars annually, and includes national charities and community foundation DAF sponsors.

In the period Jan. 1 to June 30, 2020, the number of DAF grants in all eight charitable subsectors increased compared with the same period in 2019:

Human services, 78%
Public/societal benefit, 58%
International, 42%
Environment/animal welfare, 31%
Health, 30%
Arts and culture, 29%
Religion, 26%
Education, 11%

"This is particularly interesting because it signals that DAF donors did not necessarily shift their giving priorities amid the global pandemic, rather they continued to support the same causes and amplified their giving by granting to the urgent needs created by the pandemic," Heisman said

The value of DAF grantmaking to qualified charities soared by 30% year over year, reaching $8.3 billion. Human services and health charities saw the biggest increase in dollar value of grants, 78.9% and 54.2%, while arts experienced a decline of 9%.

The number of DAF grants to charities in the first six months of 2020 totaled 1.3 million, a 37.4% increase compared with the same period in 2019, which is attributable to donors' pandemic response, the report said.

— Check out 10 Tax, Retirement Predictions for 2021: Jamie Hopkins on ThinkAdvisor.