Eileen Heisman: Hi! I'm Eileen Heisman, President and CEO of National Philanthropic Trust. Today I am going to discuss the basics of Donor-Advised Funds. While they are becoming increasing popular, many people interested in Donor-Advised Funds still don't understand how they work. The Donor-Advised Fund is a philanthropic vehicle that is established at a public charity. It allows donors to make a contribution, receive an immediate tax deduction, and then recommend grants from the fund over time.
An easy way to think about Donor-Advised Funds is like a charitable savings account. A donor contributes to that fund as frequently as they want and then recommends grants to charitable organizations when they are ready.
Donor-Advised Funds are extremely flexible, which is why they are the fastest growing and most popular giving vehicle in all of philanthropy. To date, there are more than a 160,000 Donor-Advised Funds, housed at hundreds of public charities. That number is more than double the number of private foundations.
Donor-Advised Funds have been growing at a faster rate than any other philanthropic vehicle as well. Over the past five years the number of funds have grown by almost 40%. And just one year, between 2009 and 2010, the assets in Donor-Advised Funds have grown 25% to nearly $8 billion.
Private foundations are required to grant out only 5% of their assets as mandated by law, in contrast, on average, Donor-Advised Funds grant out more than 16% of their assets.
Based on those statistics alone, it is clear that people with Donor-Advised Funds are engaged and active philanthropists. But donors don't always have to be individuals, families, trusts, corporations or other nonprofits can also establish a Donor-Advised Fund.
A fund can also work in conjunction with a private foundation, serving as a grant recipient for a foundations mandated 5% pay out. And those are the basics of a Donor-Advised Fund.