• April 23, 2014

Donor-Advised Fund Assets Reached $45-Billion in 2012, Study Finds

Fearing changes in tax policy, contributors poured money into donor-advised funds in 2012, helping assets in those accounts climb to nearly $45.4-billion that year, according to a study released today by the National Philanthropic Trust.

Contributions to the funds, which allow people to set up charitable accounts, receive an immediate tax deduction, and later decide on beneficiaries, increased 34.6 percent, to top $13.7-billion.

Much of the increase occurred in response to the “fiscal cliff” deliberations on Capitol Hill in late 2012, according to Eileen Heisman, president of the trust.

During those congressional budget talks, lawmakers considered altering the charitable tax deduction.

“Donors were worried they’d have less of a tax benefit,” she said. “Seeing this was on the horizon, donors front-loaded a year and half or two years of giving.”

Ms. Heisman predicted donor-advised funds would continue to grow next year.

The study did not capture the full impact of the fiscal-cliff deliberations for charities and financial-services firms that operate on fiscal years ending at various times through the calendar year, including the National Philanthropic Trust, Fidelity Charitable, Schwab Charitable Fund, and Vanguard Charitable Endowment Program. A Chronicle study released this spring, however, suggests that the funds are continuing to see strong returns.

Researchers at the National Philanthropic Trust looked at 1,007 charities, an increase over the 652 the trust examined last year. Of those, 603 were community foundations, 357 were charities that focus on a single cause, and 47 were charities with a national reach.

More Money to Charity

Contributors to donor-advised funds are allowed to secure a tax benefit the year a gift is made to the fund, whether or not the money actually gets donated to a charity that year. Some have criticized that structure, saying contributions sit idle too long before serving the public good because such funds place no federal requirement to give anything away. Ms. Heisman calls such criticism an “urban legend.”

The survey, she noted, found that donors channeled 16 percent of the assets in the funds to charity last year, more than three times the federal payout requirement for private foundations.

“Donor-advised funds are much more philanthropically active than private foundations,” she said, adding the donor-advised funds give at three times the rate of private foundations.

While the funds recorded impressive growth in 2012, they remain a relatively small portion of charitable giving. The funds’ $13.7-billion in contributions last year accounted for just 4.3 percent of total charitable giving.

The average size of an account also increased, rising to an all-time high of $224,921, an 11.2-percent jump over 2011. The increase, Ms. Heisman said, probably comes from the funds’ increased popularity among wealthy donors, who seek them for their tax advantages over contributions to private foundations.

“The high-net-worth marketplace is embracing donor-advised funds as a product of choice,” she said. “They’ve decided this is a good vehicle.”

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