Where Are Donors Putting Their Money?
I have an idea.
What if we helped to get people to give more?
What if there was some mechanism for an individual or couple to decide, hey I know I want to be charitable. I want to make this a priority. I’m going to put aside money, today, that has one purpose and one purpose only – make a charitable donation.
Will I get a tax break now? Sure will.
Will those funds now no longer be considered part of my estate? You bet.
Can I keep adding to this fund over time and then make distributions as I want? Yep.*
What a cool concept.
And guess what…it already exists.
We, of course, are talking about donor advised funds (DAFs).
In fact, it is one of the top growing fundraising vehicles in the country.
Cash may always be king, but let’s think of DAFs as Heir Apparent – growing in authority, responsibility, and prestige.
How can I make such an extreme claim?
Because the 2022 DAF Report from the National Philanthropic Trust (it’s the 16th annual report on the topic!) has some extraordinary statistics on Donor Advised Funds.
1) $72.67 BILLION were contributed into DAFs from individuals in 2021. That is a 46.6% increase from the contributions into DAFs in 2020.
2) $45.74 BILLION were granted from DAFs to qualified charities in 2021. That is 28.2% higher than what was granted in 2020, which is the most ever granted.
3) Over the past 10 years, the payout rate has consistently been over 20%, and this report showed that in 2021 it was 27.3% - the highest rate ever.
4) There is over $234 BILLION held in DAFs in 2021 (the most ever – up almost 40%!! from the prior year), with an average size of over $182,000 and the number of DAFS created in 2021 (not that exist, but created) was 1,285,801, the most ever created in one year.
5) About 40% of DAFs hold less than $50,000 – so we’re not just talking about your highest net worth individual donors. We’re talking about a large variety of people (that statistic from the Donor Advised Fund Account Patterns and Trends report from DAFRC).
Ok so that is a lot of statistics for you. Read it through a couple of times to really understand how much money is flowing into these, how much money is flowing to nonprofits and how many new DAFs are being created.
Donor Advised Funds are a phenomenal tool for nonprofits to expand the opportunities with their donors about what is possible.
Because let’s remember a few things -
1) Fundraising isn’t about asking for money. It’s about building relationships with people who want to make a difference in the work that you do.
2) Your best prospects are not only people who have demonstrated that they like what you do but have shown that they are philanthropic. Tell me a better way to demonstrate one’s philanthropic nature than by self-selecting to set up a fund with a sole purpose to make charitable donations?
3) You might sometimes hear feedback from a donor, I can’t give now because of the economy. It’s in flux (though, tell me a time when it wasn’t) and I can’t give more now or at the same level. This is a great time to remind them, did you already set aside money for a circumstance like this?
So how do you get gifts from donors who have donor advised funds?
Here are a few things to do:
1) You ask them. Hey, donor, thanks so much for your past support. Quick question for you – do you have a donor advised fund? Did you know you can make a gift from your DAF to us? Here is our tax ID number and legal mailing address. Do you need anything else?
2) On your website footer and on the donate page – make sure your tax ID information is easily available and remind them that they can make their donation this way. Sometimes, donors just want to check something off their list and not ask someone for information. Make it easy for them to request the gift without your assistance.
3) Make sure donors get thanked correctly after they make their gift this way. WHY? Because they should not receive a tax acknowledgment letter since the donor already received a tax deduction when they donated to the DAF. However, they should be notified of the receipt of the contribution and thanked for requesting the gift.
As the calendar year comes to an end, think about how you can secure more gifts from Donor Advised Funds.
Need some help?
* Congress has been in discussion about changing the regulations around the rate of distributions from a DAF and requiring there to be some type of minimum distribution made each year. As of this writing in the fall of 2023, no bills have been passed, but it is something to pay attention to, especially as the number of dollars grows in the DAFs in the United States.