Is new tax law propelling donor-advised funds to new heights?

Written on Feb 13, 2018

Donor-advised funds (DAFs) have grown significantly from year to year over the past few decades, outpacing growth in giving through other intermediaries. Over time, the numbers and types of institutions that act as charitable sponsors to them have also grown, along with variations on the basic theme. Some institutions provide more guidance on the donor’s giving, others provide almost none, and the amount one must devote to starting an account differs from institution to institution. But the field is undeniably growing steeply.

Long before the contents of the 2017 tax overhaul were finalized, and in the context of a booming stock market, most understood that DAFs would likely continue to grow significantly year upon year. What remains uncertain are the effects of a new tax bill passed near the end of last year that would nearly double the amount taxpayers must itemize before they can deduct their charitable contributions.

The National Philanthropic Trust (NPT) reports that donor-advised funds held around $85 billion in 2016. The organization said it did see an increase both in volume and dollars at the end of the year, compared to December of the previous year, reporting a 20% increase in dollar contributions in December between 2016 and 2017. NPT also said it opened 30% more accounts this December than last.

NPT executives called this year’s events a “perfect storm,” what with the stock market boom, tax reform, and the 457A deadline. They do not expect the DAF trend to diminish, either in enthusiasm or growth.

According to ThinkAdvisor, Schwab Charitable reports that the hike in giving preceded the tax measure, saying the number of new DAF accounts it opened spiked 91% in the second half of 2017 (over the same time period the previous year) due to stock gains and tax concerns.

Fidelity Charitable, the nation’s largest such fund, reports bringing in twice its goal for numbers of new accounts at 22,000. Vanguard reported doubling its last year’s total accounts.

The Cleveland Foundation took in $26.5 million just in December of 2017 - more than the last three Decembers combined.

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