More than $250 billiion are parked in donor advised funds and nonprofits need better strategies for moving fundholders to grant them quickly.
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The biggest problem with donor advised funds (DAFs) is that once people establish them – and enjoy a big tax break – they are often slow to donate the contents to charity. Americans have an estimated $251 billion stashed in these charitable accounts that could be put to work attacking problems like hunger, disease and poverty.
Hard work is needed to move more DAF holders to stop procrastinating and donate more of that money now.
It’s not that DAF-holders are gaming the system in some way. There is no way for them to use the money in these accounts for their personal gain. But there is nothing in the laws that regulate DAFs – a minimum required annual distribution, for example – that pushes people to quickly give the money to charity.
This week on Giving Tuesday one will see numerous efforts to inspire DAF holders to “liberate” funds to promote social good.
More nonprofits are including information for giving from DAFs in their Giving Tuesday programs.
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This is part of a trend in which more online fundraising platforms and advisors are encouraging nonprofits to be explicit about asking potential contributors to “recommend a grant from your donor advised fund” and providing them with detailed information on how to do so.
The American Cancer Society handles it this way, for example. And here is McMurry University’s DAF “How To Give” page.
With hundreds of billions in potential contributions socked away in DAFS it is uncontestable that serious fundraising organizations need to make it easier for DAF owners to give. But that sort of work should not be considered heroic. Those are simply table stakes for being a serious player in the nonprofit development world. Moving the dial even more will require greater creativity.
I recently came across an example of such “DAF-ativity” in the form of a program called #HalfMyDAF that was created, on a personal philanthropic level, by David Risher, the CEO of Lyft, and his wife Jennifer.
The power of this program was one of the reasons the couple was recently honored by Worth for “redefining success through purpose, creativity and impact.”
Each year since the Rishers created #HalfMyDAF in 2020, it has offered up a pool of matching funds as an incentive for DAF owners to commit to spend down at least half of the money parked in their accounts.
“Over the last five years, #HalfMyDAF partners and hundreds of DAF donors have made thousands of grants and moved over $70 million from DAFs to nonprofits.”
According to the program, “Over the last five years, #HalfMyDAF partners and hundreds of DAF donors have made thousands of grants and moved over $70 million from DAFs to nonprofits.” This year the matching pool hit $2.25 million thanks to the generosity of the Rishers and three other donors. Nearly 1,700 matching donations were made to groups ranging from A Place For All Animal Rescue to Zero Prostate Cancer.
That’s impressive progress, but the people behind #HalfMyDAF recognize that they have not turned the tide. “Way more money is being put into DAFs than is moving out,” #HalfMyDAF explains on its website. The amount of money sitting in DAFs has more than doubled from $120 billion to $251 billion since the program was started in 2020.
One high potential accelerant, according to #HalfMyDAF: greater action by sponsors of DAF programs (e.g. Fidelity, Vanguard and Schwab) to encourage DAF holders to more rapidly pay out funds. As #HalfMyDAF puts it: “DAF sponsors should be recommending that donors do a lot more, with the goal of spending down DAFs rather than growing them.”