Donor Advised Funds: Unleashing Capital For Impact At Scale

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ARTICLE

Donor Advised Funds: Unleashing Capital For Impact At Scale

Author(s)
Melissa Stevens
Melissa Stevens
Executive Director, Milken Institute Center for Strategic Philanthropy

For a number of years, the Milken Institute Center for Strategic Philanthropy has been among the voices advocating for philanthropists to expand the scale of their social investments by unlocking the resources being held in donor-advised funds (DAFs).

DAFs have grown exponentially in their popularity over the last few years. According to a report released last year by the National Philanthropic Trust, there are more than 700,000 DAF accounts in the country. Described as “easy” and “flexible,” IRS rules allow donors to make a contribution, take a tax deduction, and decide over time how to disburse the funds. Right now, these combined accounts hold an estimated $110 billion in funds (as of the end of 2017) and account for 12 percent of charitable giving in America.

As we all know, on Friday, March 13, President Trump declared COVID-19 a national emergency. And with each passing day as the crisis intensifies, global shortages of health workers and equipment, and the social and economic consequences of the crisis become more worrying.

Creating long-term, systemic changes for the long-term good of our world is philanthropy’s opportunity and obligation.

This is why the time has come to deploy resources being held in DAFs. Despite the market downturn, assets housed in a DAF remain valuable and are prime for deployment. There is no time to delay; the world needs philanthropic “rainy day” funds during this time of global uncertainty.

Donors and advisors must come together to get this capital off the sidelines and put it to work. There is a clear, immediate need to meet shortages of medical supplies and bolster the social and financial needs of businesses and individuals as they deal with the acute crisis COVID-19 brings with it. However, philanthropy must look to the medium and long-term as well. Philanthropic capital offers the benefit of being nimble and flexible, allowing donors to get to work immediately while thinking about longer-term solutions such as advances in science and treatments, which can take time to demonstrate results.

A number of resources, including Giving Compass and the National Center for Family Philanthropy have compiled COVID-19 response opportunities that are primed for an injection of fresh capital. Recommended resources to which donors can contribute include:

Nonprofits are stretching to provide services in their communities where layoffs are now compounding the need. While many salaried workers have the option of working remotely, hourly workers are under unimaginable strain. They are working in order to stay afloat financially, even though they are at risk, too. Science is also trying to move as fast as it can – and a number of philanthropists have stepped up to support the efforts of the scientific community in developing diagnostics, treatment, and yes, a cure.

The capital being held in DAFs has the potential to help us go fast and far, and get there together.

This article was originally published on the Giving Compass website, March 23, 2020.

Published March 24, 2020