The 2014 U.S. Trust® Study of High Net Worth Philanthropy found that philanthropic giving by households with at least $5 million in assets rose by an astounding 43% over the two-year period ending in 2013, with average donation amounts reaching $166,602. Giving by donors in the $1 million to $5 million bracket also rose substantially.
Significantly, 85% of these high net-worth (HNW) givers plan to contribute as much (50%) or more (35%) over the next three to five years, according to the study. Only 6% plan to give less, and the remaining 9% are unsure of their plans. When this study was conducted two years earlier — and thus two years closer to the trauma of the 2008-2009 financial crisis — more HNW donors anticipated giving less in the future, and more were uncertain of their future giving plans.
The study found that education was most prevalent on HNW individuals’ giving priority list, with 85% noting contributions to educational institutions. Of that group, 73% gave to higher education and 60% gave to K-12 schools. Following education on HNW givers’ priority lists were “basic needs” such as donations to Red Cross or CARE (81%), arts (70%), health (67%) and religious institutions (67%).
Of course, the 2014 U.S. Trust® Study of High Net Worth Philanthropy does not tell the entire story. Last fall, the Chronicle of Philanthropy published its annual list of U.S. charities, ranked by the amount of private donations they received the previous year. “Fidelity Charitable,” a donor advised fund (DAF), placed second, after United Way Worldwide. Other DAFs such as the Schwab Charitable and Vanguard Charitable also made the top ten.
Of course, donor advised funds don’t disclose many details about clients’ accounts. What’s more, the assets are sizeable. The National Philanthropic Trust found that in 2012 the average size of donors’ accounts was nearly $250,000.
Quoted in a 2014 New Yorker article, Stacy Palmer, the editor of the Chronicle, said she expects contributions through DAFs to skew toward organizations that HNW people typically support, such as high-profile hospitals and universities. Most importantly, Palmer said “donor advised funds could be inspiring people to donate who otherwise might not have had the time or wherewithal.” I, too, expect the number of DAFs will increase nationwide. Because DAFs handle all the due diligence, tax filing, compliance, and administration, they are more cost effective than a foundation. And people love the simplicity, illustrated below by the National Philanthropic Trust:
The National Philanthropic Trust’s 2014 Donor Advised Fund Report, using 2013 data collected from 1,012 charitable organizations, demonstrates the rapid growth of donor advised funds over the last several years. Highlights from the report include:
- Grants from donor advised fund accounts to qualified charities are nearly $10 billion, reaching a record high of $9.66 billion.
- Contributions to donor advised fund accounts total more than 5 percent of all giving in the U.S.
- Charitable assets in donor advised fund accounts total over $50 billion for the first time–an increase of nearly 20 percent over the prior year.
- There are now more than 217,000 donor advised fund accounts. The growth rate of new accounts represents a 34 percent increase over the last seven years.
If you are looking for more information about donor advised funds, you may want to check out the American Endowment Foundation—an independent sponsor of donor advised funds. Of course, you should discuss the merits of a donor advised fund with your financial advisor.