October 04, 2022
The Rise of Donor-Advised Funds
PHILANTHROPY HAS LONG BEEN CHARACTERIZED BY THE DRIVE TO MAKE A DIFFERENCE. WHILE THE PRACTICE HAS EVOLVED, THE VALUE OF KINDNESS — AND THE LEGACY OF GIVING — HAS REMAINED CONSTANT.
With the benefit of more efficient and forward-looking charitable strategies, today’s philanthropists achieve meaningful impact at the community, national and global levels. Here we explore the donor-advised fund (DAF), a charitable giving vehicle that can be employed individually or as part of a larger plan, providing donors tremendous flexibility in reaching their philanthropic vision.
A celebrated history, a popular present
While not a new technique, DAFs have grown significantly in recent years. The earliest DAFs were established at community foundations and single-issue charities, organizations that remain leaders in their philanthropic areas of expertise. Recent trends have shown a steady rise in contributions to DAFs and a surge in charitable funds established through financial firms and nationally based organizations. In 2020, grants from DAFs to qualified charities totaled an estimated $34.67 billion, a 27.0% increase over 2019 and a new high-water mark, according to the National Philanthropic Trust 2021 DAF Report. The growth included total contributions, grant dollars and charitable assets — an upward trend that will likely continue.
IN 2020, CONTRIBUTIONS TO DAFS TOTALED AN ALL-TIME HIGH OF $47.85 BILLION
Effortless setup, an administrative advantage
A DAF is a charitable giving vehicle that is owned, controlled and administered by a sponsoring public charity. A donor contributes cash or other assets while retaining advisory privileges over both the investments and grant recommendations. In many ways, a DAF can act like a private foundation or charitable savings account with distinct benefits.
DAFs do not have startup costs, can be established quickly and rely on the sponsoring organization to administer the fund — freeing donors to focus on their charitable missions. Establishing a DAF is straightforward. Once a donor chooses a sponsoring organization, next steps include opening an account, naming the fund, recommending an investment strategy and appointing advisors and successor advisors. Given the relative ease of setup, DAFs are a useful option during year-end tax planning.
A charitable contribution now, flexible grant recommendations later
Contributing cash or other assets to a DAF can happen as frequently as a donor desires, including at death. DAFs are able to accept a wide variety of complex assets, including restricted stock, real estate and business interests. DAFs may provide an excellent opportunity for a donor who operates a for-profit business and has charitable aspirations.
The deferred giving nature of DAFs allows donors to take an immediate tax deduction in the year in which the contribution is made and have flexibility around grant timing. DAF advisors can recommend grants from the fund to any number of qualified charitable organizations for charitable purposes. Advisors can also recommend multiyear grants to chosen charities and change which charities are recommended to receive grants. Since DAFs do not have an annual payout requirement, grants need not be made in any given year. Further, grants may be made in the name of the fund or anonymously, if so desired.
A singular plan for some, an integrated strategy for others
For some donors, a DAF singularly achieves their charitable giving objectives. For others, a DAF may complement and work in tandem with other philanthropic vehicles. For example, coupling a private foundation with one or more DAFs allows for increased flexibility in grantmaking. A donor may also choose to name a DAF as the beneficiary of a charitable trust. A DAF can seamlessly fit into a more complex wealth plan, and may also serve as a means to bring families together through giving today and for generations to come, while sharing and passing down a donor’s philanthropic values.
A link to the past, a bridge to the future
Glenmede was founded on philanthropic ideals in 1956, formed to serve in perpetuity as Trustee of the Pew family’s charitable interest — The Pew Trusts. To this day, Glenmede embraces its history of providing investment management and advisory services to foundations, endowments and charitable trusts, as well as assisting individuals and families to fulfill their philanthropic objectives.
Clients may rely on Glenmede’s established and growing network of relationships with community foundations and single-issue sponsoring organizations to meet their DAF needs. For clients interested in a national DAF sponsor, Glenmede offers the Glenmede DAF in partnership with the National Philanthropic Trust, the largest independent provider of DAFs.
If you have any questions, please reach out to your Glenmede Relationship Manager or email PhilanthropicAdvisory@Glenmede.com.
Glenmede Donor-Advised Fund is offered under an agreement between The Glenmede Trust Company, N.A. and National Philanthropic Trust (“NPT”), a tax-exempt public charity and sponsor of the Fund which maintains exclusive legal control over contributed assets. This material provides information of possible interest to Glenmede’s clients and friends, and does not provide investment, tax, legal or other advice. It contains Glenmede’s opinions and/or projections, which may change after the date of publication. Information obtained from third-party sources is assumed reliable but is not verified. Any potential outcome discussed, including but not limited to performance, legislation or tax consequence, ultimately may not occur due to various risks and uncertainties. Clients are encouraged to discuss anything of interest in this material with their tax advisor, attorney or Glenmede Relationship Manager.