Donor-advised funds (DAFs) have become increasingly popular in recent years as a way for individuals and organizations to make charitable donations. DAFs allow donors to make contributions to a fund, which is then managed by a sponsoring organization. The donors can then recommend how the funds are distributed to various charities over time. However, the question of how much funding is available through DAFs is a complex one. In this blog, we will explore how much DAF funding is available, how it is distributed, and the factors that affect DAF giving.
What is DAF Funding?
Donor-advised funds (DAFs) are a type of charitable giving vehicle that allows donors to make contributions to a fund, which is then managed by a sponsoring organization. The donors can then recommend how the funds are distributed to various charities over time. DAFs offer several benefits to donors, including tax benefits, flexibility, and convenience.
According to the National Philanthropic Trust, there were over 728,000 DAF fund accounts in the United States in 2019, with total charitable assets of $121.42 billion. This represents a significant increase from previous years, indicating the growing popularity of DAFs among donors.
How much Funding is Available Through Dafs?
According to the National Philanthropic Trust, as of 2019, there were over 728,000 DAF accounts in the United States, with a total charitable asset value of $121.42 billion. This represents a significant increase from previous years, indicating the growing popularity of DAFs among donors. The amount of funding available through DAFs is dependent on the contributions made by donors, and the assets are managed by the sponsoring organization.
Individual Donors:
Individual donors are attracted to DAFs for a variety of reasons, including the tax benefits of making charitable contributions, the flexibility to donate to multiple charities through a single account, and the ability to involve family members in the giving process. In addition, DAFs offer a way to make charitable contributions while retaining some control over the distribution of the funds.
Corporations:
Corporate DAFs have become increasingly popular in recent years as a way for companies to fulfill their corporate social responsibility (CSR) goals. Corporate DAFs allow companies to make charitable contributions while retaining some control over the distribution of funds. This can be an appealing option for companies that want to support charitable causes but also want to ensure that their donations align with their overall business goals and values.
Private Foundations:
Private foundations have also been using DAFs as a way to manage charitable contributions. Private foundations are required to distribute a minimum of 5% of their assets each year to maintain their tax-exempt status. By using a DAF, private foundations can make a single contribution to the DAF and then recommend grants to specific charities over time, allowing them to manage they are giving more efficiently.
How is DAF Funding Distributed?
The distribution of DAF funding is complex and varies depending on the sponsoring organization and the preferences of the donors. Typically, donors make contributions to a DAF and then recommend grants to specific charities over time. The sponsoring organization is responsible for processing the grants and ensuring that they meet the legal requirements for charitable giving. According to the National Philanthropic Trust, DAF donors recommended grants totaling $23.42 billion in 2019, an increase of 15.3% from the previous year. This suggests that DAF donors are becoming more active in their giving and are increasing the amount of funding they recommend to charities.
Factors Affecting DAF Giving
There are several factors that can affect DAF giving, including tax laws, market conditions, and donor preferences. Tax laws play a significant role in DAF giving, as they determine the tax benefits that donors receive for their contributions. In the United States, donors can receive an immediate tax deduction for contributions to a DAF, but the funds are not immediately distributed to charities.
Instead, the donor can recommend grants to specific charities over time, allowing the funds to grow tax-free in the meantime. Market conditions can also affect DAF giving, as donors may be more or less inclined to make contributions based on the performance of their investments.
For example, during a market downturn, donors may be less likely to contribute to a DAF, as their investment portfolio may have declined in value. Donor preferences also play a role in DAF giving, as donors may have specific causes or charities that they wish to support. According to a survey by Fidelity Charitable, the top causes supported by DAF donors are education, human services, and health.
Conclusion
DAF funding is a complex and dynamic topic that is influenced by a variety of factors. DAFs offer donors a flexible and convenient way to make charitable contributions while also providing tax benefits and the ability to grow their charitable assets over time. The total amount of DAF funding available is significant, with over $121 billion in charitable assets in the United States alone. However, the distribution of this funding is dependent on the preferences of individual donors and the policies of sponsoring organizations. By understanding the factors that influence DAF giving, donors can make informed decisions about their charitable contributions and make a meaningful impact on the causes they care about.