The next generation of philanthropists is looking for innovative ways to support good causes and recent research suggests this has led to a rise in the use of donor advised funds (DAFs).
A DAF is essentially a charity savings account where a donor can make contributions, enjoy tax benefits and recommend grants from the fund over time. The Next Gen Donors research project by nextgendonors.org found that while the use of traditional foundations and charitable trusts was declining, DAFs were on the increase.
Making it simple
This may be in part because they allow the new generation to go ‘off mission’ from the family foundation while also outsourcing administration to a third party, making giving simpler. And if you’re giving to a variety of causes, it can also make it easier to claim ‘gift aid’ because the donor is often supplied with regular statements and a tax statement at the end of the year.
Although the explosive growth of DAFs in the US has been recent, they have been around since the 1930s, when they were used by community foundations to encourage local philanthropy and by single-issue organisations such as museums. They became more popular from 1969, following new rules in the US relating to foundations, but the first commercial provider wasn’t approved until 1991.
Growing in the UK
The US remains the epicentre of DAFs but they are beginning to grow in popularity in Canada and the UK.
The rise of DAFs supports the findings of another survey from the Johnson Center for Philanthropy, which found that while the next generation of donors, born between 1964 and 2000, are surprisingly similar to their parents in many of their goals, they simply differ in how they want to achieve them.