In recent years, fundraisers have put more and more energy into attracting people with donor-advised funds and letting existing supporters know their organizations readily accept DAF gifts. It only stands to reason, with nearly $229 billion in assets held in DAFs, according to the National Philanthropic Trust. A new study provides detailed information about DAFs that can help development professionals sharpen their DAF fundraising strategies.
The 2024 National Study on Donor Advised Funds analyzed 57,539 individual accounts. This is in contrast to most reports on DAF activity, which typically rely on aggregate 990 data from DAF-sponsoring organizations. The report was the result of voluntary participation by 111 DAF programs at community foundations and national and religiously affiliated sponsoring organizations across the country from 2014 to 2022.
GivingTuesday partnered with the DAF Research Collective to help collect the data for the report. Woodrow Rosenbaum, GivingTuesday’s chief data officer says the implications for fundraisers are substantial.
“I think there’s this view, this sort of image in the nonprofit sector that the typical DAF fund holder has a huge amount of money that moves really slowly in giant chunks and requires an enormous amount of one-on-one donor stewardship to make a case and get a huge grant,” he says. “That’s not the case. This [report] really shows that the majority of these funds are small. The majority of these funds are moving more rapidly, and the majority of these grants are general operating expense.”
He recommends that nonprofits not be “intimidated” by DAF holders and come in with a plan to approach and steward them like other donors.
Some key takeaways from the report:
Although gifts from DAFs spike in November and December, giving is steady throughout the year. The fourth quarter accounted for 32 percent of annual grant dollars, the report noted. However, gifts of less than $50,000 were more prevalent at the end of the year than gifts of more than $50,000.
“The main difference between December and May is more organizations are out there asking or engaging in December,” he says. “So for sure, your organization should include DAF fund holders in your strategy at end-of-year, but also, it doesn’t only have to be at the end of the year. People are giving when they’re asked.”
Also of note: Fifty-seven percent of DAF holders made contributions to their accounts in the fourth quarter, suggesting they wanted the tax advantage but weren’t as ready to dole out the money.
More than 90 percent of DAF accounts have succession plans in place for when the adviser dies. Of those, 69 percent had designated a successor adviser, such as a family member and 30 percent designated either a charity or the sponsoring organization The remaining 1 percent chose a combination. Danielle Vance-McMullen, a co-author of the report, says the researchers lumped charities and sponsoring organization together because many of the sponsoring organizations were community foundations, and the DAF holder left the money endowed for a specific charity that held an account at the community foundation. The researchers plan to take a closer look at succession plans in a future report.
Unrestricted grants are more numerous but account for far fewer dollars. Over all, 59 percent of the grants from DAFs in the study were unrestricted, but they tended to be smaller. Only 29 percent of grant dollars were general operating support, while 71 percent were earmarked for specific purposes.
Rosenbaum points out that restricted gifts aren’t necessarily bad. “Not all restrictions are equal,” he says. “We’re a great example. We have general operating support from a lot of our supporters. Then we have funders who fund the GivingTuesday Data Commons. That’s technically restricted, but how we spend that on that body of work is up to us.”
One-fifth of DAFs were inactive from 2020 to 2022.. Critics of donor-advised funds complain that people get the tax break for contributing to their accounts but then don’t pay out the money to charities. More than one in five accounts made no grants in the final three-year period examined in the study. Looking throughout the entire study time frame, 67 percent of DAFs made no grants “within the same year they opened.”
McMullen-Vance noted that donors often spend that first year just figuring out how to spend their DAF.
“It takes the urgency out of year-end for making your decisions about philanthropy,” she says. “You can add a contribution in your DAF, and then you have all of the next year, or years, to decide how you want to distribute that.”
The report found that by the third year, 54 percent of accounts had granted more than half of the original contribution. By the eighth year, 92 percent had made a grant, 75 percent had donated more than half of the original amount, and 58 percent had given away all of the original contribution.
The largest DAFs hold the lion’s share of assets. DAFs that have less than $100,000 make up 65 percent of accounts, but together, they hold only 3 percent of all DAF assets. On the flip side, DAFs that hold $10 million or more make up fewer than 1 percent of accounts, but they hold 60 percent of all DAF assets. Similarly, accounts with $1 million to $9.99 million account for just 6 percent of accounts, yet they hold 24 percent of all DAF assets.
Large sums like that may make fundraisers’ eyes water with possibilities, but Vance-McMullen says it’s important to talk to DAF donors at all levels. “Lots of different donors out there have DAFs, and what brings them together is that they’ve made a commitment to charity,” she says. “Asking your donors, ‘Have you set aside any money for charity?’ is a good way to start that conversation. If they have a DAF, that automatically puts them a little bit higher on your prospect list.”
DAF holders often support more than one charity. In times of economic turmoil, charities feel like they’re in competition for dollars. The good news is more than half of DAF holders support three or more organizations and 9 percent support 15 or more. The largest share of DAFs — 45 percent — support one or two organizations, while 24 percent support three to five organizations, and 11 percent gave to six to eight.
When it comes to targeting young, new donors, DAFs may not be the best bet. Baby boomers held roughly half of all DAFs. Generation X held just over 20 percent, the Silent Generation 18 percent, and millennials less than 10 percent. The oldest (Greatest Generation) and youngest (Gen Z) together accounted for 3 percent.