This November, the National Philanthropic Trust released their latest report on donor-advised funds, or DAFs. These giving vehicles continue to skyrocket, and are now taking in a quarter of all individual giving in the US.
Until quite recently, private foundations were the favorite charities of the wealthy, but DAFs have now left those foundations in the dust.
According to the NPT report, there was $229 billion sitting in the coffers of DAFs in 2022. Donors gave nearly $86 billion to DAFs, versus $45 billion to private foundations.
Giving USA, the gold standard of reporting on national charitable giving, said that individuals donated over $319 billion to charity in 2022. This means that the $86 billion that DAFs received made up a full 27 percent of individual giving that year.
Commercial DAF sponsors (like Fidelity Charitable and Schwab Charitable) totally dominate the field. Commercial DAFs took in $64 billion in contributions in 2022, and now have combined assets of $153 billion — more than two-thirds of the total for all DAFs.
The problem is that once donations go into a DAF, there is no legal requirement that they ever come back out to working charities. Donors get publicly-subsidized tax deductions when they donate, but the money can just sit in the account, earning income for portfolio managers.
DAF sponsors say payout is high, but they tend to only report the aggregate payout of all their accounts mashed together. There is no way to know whether any individual DAF account is paying out anything at all.
This lack of accountability means that every dollar given to a DAF is a dollar potentially sidelined forever — never to be used to help heal the sick, house the homeless, or reverse environmental destruction. We need to fix the charitable system to correct this.
