In my role leading Fidelity Philanthropic Consulting, I help individuals and companies realize their vision for philanthropy—and emphasize effectiveness and impact. For many, this means using tax-efficient giving vehicles, like donor-advised funds (DAFs), private foundations, and charitable trusts. Particularly, the use of DAFs, which can be thought of as charitable investment accounts sponsored by a public charity that donors can use to facilitate their giving, has expanded in recent years.
In 2021 alone, National Philanthropic Trust reported a 27% increase in the number of DAFs with over 1.2 million accounts across 995 providers including national sponsors, community foundations, and single-issue charities. Here are three trends from the recently released 2023 Fidelity Charitable Giving Report highlighting how donors are using these vehicles:
- DAFs can make the decision to give easier, despite economic rollercoasters: Inflation, rocky markets, and economic uncertainty continue to force Americans and corporations to make conservative decisions regarding their discretionary spending. While charitable giving is sometimes among the first line items cut or reduced, Fidelity Charitable’s community of more than 300,000 donors granted 2.2 million grants worth $11.2 billion, which is a 19% increase over 2021. With a DAF organizations or individuals can separate the financial decision-making of what to give from the decisions about what cause areas and charities to support. The account then acts as a ready reserve, making it easier to continue supporting nonprofits, even during economically challenging times.
- DAF donors are actively deploying charitable dollars into the community: While DAF donors are strategically giving in coordination with tax benefits, they are putting their charitable dollars to work in their communities and beyond. Nearly 90% of Fidelity Charitable donors gave at least one grant last year with an average number of 11.8 and amount over $4,000, touching charitable sectors like religion, human services, and education. 45% of dollars deployed by donors remained local, staying in their home state. And while donors can specify a purpose for their grants, over 60% chose “where it’s needed most” showing a level of trust in the hands of nonprofits to work unrestricted and based on their needs. From my experience working with corporate donors, I’ve found that DAFs can help companies more easily and effectively activate their funds in the community, particularly in times of disaster or crisis.
- DAFs enable a range of donors to give more effectively: Despite market dips, Fidelity Charitable continued to see noncash donations rise with nearly 60% of donors contributing non-publicly traded assets, like limited partnerships, and publicly traded assets, like stocks. With fewer Americans itemizing and 56% of Fidelity Charitable donors having less than $25,000 in their charitable account, it seems that more DAF donors are realizing other benefits. From potentially eliminating capital gains (a benefit whether you itemize or not), to long-term investment growth, to nonfinancial benefits like streamlined recordkeeping, there is a broad range of donors putting their checkbooks and credit cards away in hopes of making a difference.
As companies and organizations consider philanthropic programs for 2023 and beyond, it’s important that they identify the best tools to use to meet their specific goals. Private foundations can also be an effective giving option that works well alongside a DAF. Whether the goal is to focus efforts on a single-issue area and enhance brand reputation or to recognize the most effective tax treatment, there’s incredible value in understanding the landscape of available giving vehicles.
If you use a DAF as part of your corporate or employee giving programming, I’d love to hear from you and understand how you’re incorporating it as part of your larger plan.
Fidelity Philanthropic Consulting is a division of National Charitable Services, a Fidelity Investments company. The Fidelity Investments name and logo are registered marks of FMR, LLC. 1077340.1.0
Fidelity Charitable is the brand name for the Fidelity Investments® Charitable Gift Fund, an independent public charity with a donor-advised fund program. Various Fidelity companies provide services to Fidelity Charitable. The Fidelity Charitable name and logo, and Fidelity are registered service marks of FMR LLC, used by Fidelity Charitable under license. Giving Account® is a registered service mark of the Trustees of Fidelity Charitable.