Donor-Advised Fund Report

Transcription

1 2010 Donor-Advised Fund Report

2 This report was edited and compiled by Andrew W. Hastings, Vice President of Business Development at National Philanthropic Trust. Research assistance was provided by Paul Bandera and Iris Leon. NPT gratefully acknowledges all of the organizations that shared their donor-advised fund related statistics and information. National Philanthropic Trust. All rights reserved.

3 About this Report This report provides an up-to-date analysis of the donor-advised fund market. It is based on data that was collected during the second and third quarters of National Philanthropic Trust (NPT) studied more than 300 charitable organizations that administer donor-advised funds. These organizations were classified into three groups: national programs, community foundations 1 and other sponsor organizations. The latter group includes universities, religious denominations and "single-issue" charities. The majority of data in this report was taken from public tax returns (IRS Form 990), audited financial statements, annual reports and surveys. 2 Additional data came from other public sources (e.g. The Chronicle of Philanthropy). Organizations Examined in this Report 30 National programs and financial institutions that sponsor donoradvised funds 178 Community foundations that sponsor donor-advised funds 123 Other organizations including universities, faith-based institutions and single-issue charities that sponsor donor-advised funds 1. According to Foundation Center, there are 717 community foundations in the United States (Foundation Center s Statistical Information Service, Number of Grantmaking Foundations, 1975 to 2007) 2. Most of the organizations examined in this report ended their fiscal year on June 30, Therefore, most of the data in this report reflects the economic downturn that occurred during 2008 and This report also contains some minor revisions to previous numbers. These revisions reflect a 30% increase in sample size and additional details on the new IRS Form

4 Market Overview Historic Recession Leads to Historic Declines in Charitable Giving In 2009, the U.S. economy continued to struggle. Charitable donations declined for the second year in a row. According to Giving USA, the overall rate of that decline was 3.2%. The Chronicle of Philanthropy reported an 11% decline for the top 400 charities, and Foundation Center reported an 8.4% drop in giving among the nation s grantmaking foundations. That represents the largest decline since Foundation Center began gathering statistics more than 50 years ago. Donor-advised fund assets, contributions and grants all decreased for the second year in a row. That said, the number of donor-advised funds actually increased by 3% to a total of more than 150,000. Also, total grant dollars from donor-advised funds to charities ($6 billion) exceeded total contributions into donor-advised funds ($5.9 billion). Looking to the future, there are several indications that donor-advised funds will experience significant growth in National Philanthropic Trust ended its fiscal year on June 30 with donor-advised fund contributions at record levels. Fidelity Charitable Gift Fund s mid-year report said that charitable contributions were up 67 percent, and new account openings increased 19 percent from the same period as last year. 3 If the stock market continues to recover and consumer confidence improves, charitable giving from donor-advised funds may increase for the first time in three years. Asset values may also return to 2007 levels. Federal tax policy could have a major impact on donor-advised funds in As of this writing, there are unresolved issues regarding estate taxes and income tax rates for high-income individuals. These issues affect financial and estate planning which, in turn, affects charitable giving. Table 1: Donor-Advised Fund Market Overview % Change Assets Under Management $28.9 billion $25.2 billion (12.7%) Total Contributions $8.4 billion $5.9 billion (29.6%) Total Grant Dollars $6.6 billion $6.0 billion (9.3%) Average Size of DAF $195,367 $165,619 (15.2%) Total Accounts 147,990 $152, % 3. Fidelity Charitable Gift Fund, Fidelity Charitable Gift Fund Reports Strongest First Half for Grants in 19-Year History, press release, August 11,

5 A Comparison of Giving Vehicles Donor-Advised Funds are Still the Fastest Growing Charitable Giving Vehicle In 2009, the number of donor-advised funds grew faster than the number of any other charitable giving vehicle (Table 2). Donor-advised funds also had the biggest drop in asset value (12.7%). This can be partly attributed to a decline in contributions. Also, compared to private foundations, donor-advised funds pay out a much higher percentage in grants. Private foundations are the only charitable giving vehicles that experienced a growth in assets for 2009 (Table 3). Foundation Center attributes this growth to stock market appreciation and an 8.4% drop in overall grants. 4 Despite this growth, private foundations are 14.5% below their historic high of $682.2 billion. Table 2: Donor-Advised Fund Growth vs. Other Charitable Giving Vehicles (Total Number of Funds) % Change Donor-Advised Funds 147, , % Charitable Remainder Unitrusts 5 96,248 95,928 (0.3%) Private Foundations 4 75,187 75, % Charitable Remainder Annuity Trusts 5 19,241 18,572 (3.5%) Charitable Lead Trusts 5 6,521 6, % Pooled Income Funds 5 1,488 1,415 (4.9%) Table 3: Donor-Advised Fund Growth vs. Other Charitable Giving Vehicles (Dollar Value of Assets) % Change Private Foundations $ billion 4 $ billion 4 3.3% Charitable Remainder Unitrusts 5 $ billion $96.06 billion (9.7%) Donor-Advised Funds $28.91 billion $25.23 billion (12.7%) Charitable Lead Trusts 5 $19.65 billion $18.27 billion (7.0%) Charitable Remainder Annuity Trusts 5 $8.93 billion $8.14 billion (8.8%) Pooled Income Funds 5 $1.46 billion $1.32 billion (9.6%) 4. Foundation Center, Foundation Growth and Giving Estimates Current Outlook (2010 Edition) 5. Internal Revenue Service, IRS Statistics of Income Division, September 30,

6 Historical Growth Patterns The Total Number of Donor- Advised Funds Continues to Rise Donor-advised funds began in the mid-1930s and were offered almost exclusively by local community foundations, Jewish Federations and other faithbased institutions. National donor-advised fund programs began to emerge in the early 1990s, and since that time, their growth has been dramatic. In the last 15 years, the total number of donoradvised funds has grown from 16,242 to 152,365. The vast majority of these funds (72%) were established in the last 10 years. Table 4: Total Number of Donor-Advised Funds 200, , ,000 50, , , , , , Table 5: Change in Number of Donor-Advised Funds 20% 17.6% Even though last year's growth rate was only 3%, donoradvised funds now outnumber private foundations by more than two to one. 15% 10% 5% 0% 11.1% 13.4% 10.2% 3.0% Since 2005, the total number of donor-advised funds has grown by 51.3% (Table 4). Even though last year's growth rate was only 3%, donor-advised funds now outnumber private foundations by more than two to one. Donor-advised funds also exceed the combined number of charitable remainder unitrusts, charitable remainder annuity trusts, charitable gift annuities and pooled income funds. Table 6: Total Assets in Donor-Advised Funds (Billions) $30 $25 $20 $15 $10 $5 0 $22.9 $24.7 $29.4 $28.9 $ Table 7: Change in Total Assets in Donor-Advised Funds Accounts Assets Contributions 25% 20% 15% 10% 5% 15.1% 19.0% 21.1% Grants 0% -5% -10% -1.7% -15% -12.7%

7 Donor-Advised Fund Assets Drop for the Second Straight Year In the last 15 years, donor-advised fund assets have grown from $2.4 billion to $25.2 billion. They peaked in 2007 and have declined for the past two years (Table 6). This is due to a decline in contributions (Table 8), strong grantmaking (Table 9) and a decline in the stock market. Grants Exceed Contributions In 2009, the total amount of grants from donoradvised funds exceeded the amount of contributions (Tables 8 and 9). This suggests that donors have remained committed to charitable giving despite a loss of discretionary income and a drop in donoradvised fund value due to the economic downturn. The total value of grants to charities from donoradvised funds reached the $6 billion level for the second year in a row. This represents a decline of 9.3% from That number closely matches the 8.4% decline in grants made by foundations during this same period. 6 Private foundations have a 5% grant payout requirement and rarely grant more than that amount each year. Many donor-advised funds do not have a 5% grant payout requirement. However, over the past 5 years, donor-advised funds have granted an average of more than 17% (Table 10). Table 8: Total Value of Contributions to Donor-Advised Funds (Billions) $10 $8 $6 $4 $2 $0 $8 $7 $6 $5 $4 $3 $2 $1 $0 Table 10: Average Annual Payout Percentage for Donor-Advised Funds 20% 15% $ % $ % $ % $ Table 9: Total Value of Grants from Donor-Advised Funds (Billions) $3.4 $4.6 $5.6 $6.6 $ % 17.2% 10% 5% 0% Foundation Growth & Giving Estimates, April 2010, Foundation Center. 5

8 A Comparison of Sponsor Organizations National There are over 30 national programs that sponsor donor-advised funds. Here are their key measures for 2009: Table 11: Total Number of Donor-Advised Funds by Sponsor Organization (Thousands) Accounts - This group s total number of donoradvised funds grew by 6.2%. This was the fastest rate of growth among all groups (Table 11). National programs also had the lowest average donor-advised fund size (Table 12). Most of these programs were created after 1992 and have had a relatively short time to experience stock market growth. Also, two national programs elected to reduce the size of their donor-advised fund minimum National Community Foundations Other Assets - The total value of assets in this group s donor-advised funds decreased by 14.5%. This was heavily influenced by a drop in contributions at the two largest national programs. Fidelity Charitable Gift Fund assets decreased by 40% and Schwab Charitable Fund assets decreased by 45%. Contributions - The total value of new contributions to this group's donor-advised funds decreased by 35.5%. Despite this decrease, it was the highest total value of contributions among all of the groups (Table 14). Grants - The total value of grants from this group s donor-advised funds decreased by 5%. Even with this decrease, it was the highest total value among all three groups (Table 12) and the second highest total value in the last five years. Table 12: Average Size of Donor-Advised Fund by Sponsor Organization (Thousands) $400 $350 $300 $250 $200 $150 $100 $50 $0 $153 $144 $117 $385 $330 $284 $193 $173 $ National Community Foundations Other Table 13: Total Value of Assets in Donor-Advised Funds by Sponsor Organization (Billions) $15 $12 $9 $11.01 $11.55 $9.87 $12.72 $11.83 $10.30 Accounts Assets Contributions Grants $6 $3 $0 National Community Foundations $5.64 $5.52 $ Other 6

9 Community Foundations There are more than 700 community foundations that sponsor donor-advised funds. Here are their key measures for 2009: Accounts - This group s total number of donoradvised funds increased by 1.4%. Community foundations also had the largest average donor-advised fund size (Table 12). This group has sponsored donoradvised funds for the longest period of time and has benefitted from long-term market growth. Assets - The total value of assets in this group s donor-advised funds decreased by 12.9%. This relatively low rate of decline suggests that community foundations weathered the financial storm better than the other groups (Table 13). Contributions - The total value of new contributions to this group s donor-advised funds decreased by 11%. This drop was the lowest of all the groups (Table 14). Notably, four out of ten community foundations experienced a decrease in contributions of 30% or more. Other Sponsor Organizations There are over a hundred other charitable organizations that sponsor donor-advised funds. Many of these organizations, notably the Jewish Federations, have a long-standing history in the donor-advised fund arena. Here are their key measures for 2009: Accounts - This group s total number of donoradvised funds decreased by 3.5%. This was the only group to experience a decrease (Table 11). Assets - The total value of assets in this group s donor-advised funds decreased by 10%. Contributions - The total value of new contributions to this group s donor-advised funds decreased by 33%. This was influenced by a number of large programs that saw a decrease in contributions of 50% or more. Grants - The total value of grants from this group s donor-advised funds decreased by a relatively low rate of 2.1% (Table 15). Grants - The total value of grants from this group s donor-advised funds decreased by 19%. Despite this decrease, the total value of grants exceeded $2 billion for the third year in a row (Table 15). Table 14: Total Value of Contributions to Donor-Advised Funds by Sponsor Organization (Billions) Table 15: Total Value of Grants from Donor-Advised Funds by Sponsor Organization (Billions) $5 $3 $4 $3 $2 $1 $4.16 $4.28 $2.76 $2.70 $2.34 $1.96 $2.00 $1.77 $1.19 $2 $1 $2.19 $2.60 $2.47 $2.06 $2.46 $2.00 $1.58 $1.54 $1.37 $ $ National Community Foundations Other National Community Foundations Other 7

10 Projections and Observations Projections In last year s Donor-Advised Fund Report, we accurately predicted a continued decline for both charitable giving and donor-advised fund contributions. We noted that charitable contributions are discretionary and that giving will not increase until confidence in personal finances, the economy and the stock market is restored. This time, we predict that donor-advised funds will rebound strongly in 2010 and Furthermore, we anticipate marked gains across all areas assets, grants, contributions and new accounts. Three of the top four national programs have already reported contribution and grantmaking activity Observations In the last year, we have observed that ultra-highnet-worth (UNHW) individuals are starting to show an increased interest in donor-advised funds. The reason for this may be that donor-advised funds allow UHNW individuals to give anonymously. This feature protects UHNW individuals from unwanted charitable solicitation. A private or family foundation must publicly disclose all grants and charitable activity. We have also observed that donor-advised funds are becoming a more significant part of the estate planning process. This should continue to gain momentum as the Baby Boom generation reaches retirement age. Donor-advised funds can receive proceeds from an estate or be the beneficiary of an We predict that donor-advised funds will rebound strongly in 2010 and Furthermore, we anticipate marked gains across all areas assets, grants, contributions and new accounts. that is substantially higher than Assets in donor-advised funds may not reach their 2007 peak value of $29.4 billion, but we do expect them to rise significantly. We project that national programs will rebound at a faster rate than other market segments. This is due to the influence of Fidelity Charitable Gift Fund and Schwab Charitable Fund, both of which are reporting gains in By the end of 2010, the value of assets in national programs may exceed the value of assets in community foundations. At any time, of course, the economy could derail these projections. 7 And even with a healthy economy, changes to the tax code could have a negative impact. If Congress doesn t clarify its policy with regard to income and estate tax rates, donors may delay their giving. We do not expect this issue to affect 2010, but it may slow down the growth of donor-advised funds in Individual Retirement Account, qualified benefit plan or insurance policy. Summary Donor-advised funds are poised for significant nearterm growth, especially if the economy continues to improve. In the long term, this growth will be sustained by donors, advisors and attorneys who become more aware of the donor-advised fund and its advantages. National Philanthropic Trust is an independent public 8 7. Standard and Poors 500 total return index fell by 5.1% between December 31, 2009 and February 8, It then rose by 15.6% between February 8 and April 23. Finally, it fell by 15.0% between April 23 and June 20.

11 National Philanthropic Trust is an independent public charity dedicated to providing expertise to donors, foundations and financial institutions, enabling them to realize their charitable giving goals through the use of donor-advised funds. Founded in 1996, NPT is among the 50 fastest growing charities and one of the top 25 grantmakers in the United States with $900 million in assets under management. Since its inception, NPT has raised over $2 billion in charitable assets, and made over 44,000 grants to U.S. and international charities totaling $1 billion.

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