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What Role do Donor Advised Funds Play in the Philanthropic Landscape?

According to the 2014 Donor-Advised Fund Report, published by the National Philanthropic Trust, donor advised funds are the fastest-growing vehicle for charitable giving in philanthropy today.  The report includes data from three types of organizations that offer donor advised funds: the charitable arms of national financial services companies, community foundations and single-issue charities (for example, universities or faith-based charities).

Highlights from the 2014 report — for 2013 donor advised fund activity, the most recent full year of data available:

  • Contributions to donor advised funds at community foundations grew 9.9 percent
  • Contributions to donor advised funds increased about 23.5 percent over 2012 contributions
  • Grants from donor advised funds to qualified charities increased 12.6 percent over the 2012 grants
  • The grant payout rate from donor advised funds was over 20 percent
  • Growth of donor advised funds outpaces that of private foundations in both dollar value of assets and total number of funds

Find the complete 2014 Donor-Advised Fund Report here.

At the Rancho Santa Fe Foundation, donors establish donor advised funds for many reasons that reflect the value of these funds in the broader philanthropic landscape.  Donor advised funds offer tax advantages, ease of use and a strategic approach to charitable giving. Learn more about donor advised funds here.

Simplify charitable giving

Donors can transfer many kinds of assets into a donor advised fund, including appreciated stock, and they receive a tax deduction when they contribute to their fund.  They indicate the qualified charities of their choice to receive grants from the fund over time, the RSF Foundation writes and sends the checks and donors have fewer receipts to itemize at tax time.

Donor advised funds are also much less complex and costly to set up than establishing a private foundation. Compare the main differences between donor advised funds and private foundations here.

Maintain charitable giving through life changes

Many donors are aware that their level of charitable giving could decrease significantly when they retire or experience a life event that reduces their income level.   Donors can build their donor advised funds in their working years to allow them to continue their charitable giving at a consistent level when their circumstances change.  The tax reform proposal that made the news in 2014 for a required 5-year spend down for donor advised funds works against this advantage of the funds.  The nonprofit community benefits if donors can continue to support the charities and causes they care about consistently through life changes.

Develop a strategic approach to charitable giving

Unlike the commercial financial services companies that offer donor advised funds through their charitable arms, the RSF Foundation provides charitable giving expertise to our donors.  This can increase the valuable role that donor advised funds play in the philanthropic landscape by enhancing donors’ ability to be more effective and have greater impact with their charitable giving.

We also work closely with professional advisors and estate planning attorneys.  Donor advised funds have proven to be a good vehicle for these professionals to begin conversations about philanthropy with their clients without being seen as recommending specific charities or causes.  The donor advised fund option puts donors in control of their giving decisions, while providing simplicity and offering expertise for a strategic approach to their giving.