New DAF Study Tells a Compelling Story for Policymakers

New donor-advised fund (DAF) data released this week underscore the flexible and dynamic nature of the giving vehicle as members of Congress and the Administration consider policy and regulatory changes that could potentially impact donors, the assets they give, and the charities who receive them. 

The 70-page report from the DAF Research Collaborative, the largest fund-by-fund analysis of DAFs, analyzed payout rates, donor and account characteristics, size and timing characteristics, and several other variables related to DAFs from three types of sponsoring organizations – community foundations, national organizations, and religiously-affiliated organizations. In other words, there is a lot of data here, and it will prove useful as DAF stakeholders advocate for favorable policies in Washington. 

Here are a few topline takeaways that will be important to note on Capitol Hill and at the Treasury Department: 

1. DAFs are a giving vehicle for everyone. 

Half of all DAF accounts studied had total assets below $50,000 at the end of 2021. Many critics of DAFs point to them as a plaything of the wealthy, suggesting they are only as valuable as the deduction and benefit they provide to the high-net worth individuals. The numbers don’t bear that out, with only 7 percent of DAF accounts holding $1 million or more. Instead, the data show us the majority of DAF accounts are not for the wealthy mega-donors but for a broader population of generous Americans who want to be strategic and impactful with their philanthropy, regardless of their income level or ability to make large gifts. 

2. DAF donors spend time building early then grantmaking later. 

Of the DAFs studied, 22 percent were inactive in the most recent three years (2020-2022), but those tended to be the smaller and newer accounts. There are many reasons donors may wait to recommend a grant out of a DAF after they first open the account, but the longer they hold the fund, the more likely they are to recommend grants. 

Within eight years, nearly 60 percent of all DAFs have granted out their original contributions. What this tells us is that the alleged concern that money is just sitting in DAFs in perpetuity is unfounded. There may be years, or a cluster of years, in which donors don’t advise grants out of their DAFs, but that happens less than a quarter of the time, and after about three years of an account being open, money is flowing out of the DAF more than not. 

3. DAFs allow donors to be responsive throughout the year. 

One-third of charitable gifts are made in December, with 10 percent of all giving happening in the last three days of the year. For DAFs specifically, 57 percent of all funds contributed to DAFs come in during the fourth quarter of the year. This is likely attributable both to the holiday season fundraising appeals and tendency for generosity around that time, as well as timing donations to receive a charitable deduction for the concluding tax year. However, charities’ needs don’t cluster in the fourth quarter of the year, and DAFs make it possible for donor-advisors to be nimble throughout the year. Grants from DAFs are more evenly distributed throughout the year, with only 32 percent of grants being made in the fourth quarter. Furthermore, the major gifts (over $50,000) are distributed more evenly throughout the year, underscoring the responsive nature of DAF donors. 

4. Fund-level payout rates remain impressive. 

Even when excluding closed accounts (which have a 100 percent payout rate due to closure), the average fund-by-fund payout rate remained at 17 percent or above, more than three times the required payout rate for private foundations. As critics continue to call for payout rate requirements for DAFs, this data makes clear any reforms that have been proposed so far, whether a percentage of assets or time-horizon payout, would be less than what is voluntarily being done. 

The National Study on Donor Advised Funds has a lot of great data on DAF use and donor behavior, and it will surely shape conversations with policymakers and regulators over the next several months and years as they consider how to treat these giving vehicles. Approaching those conversations through a strategic lens will be critical as DAF sponsors continue to tell the story of their impact and necessity for communities. 

To learn more about Integer’s DAF Policy Network and opportunities to educate policymakers in DC on the importance of DAFs, please reach out to Sara Barba (sbarba@integerpolicy.com).