42% of Its Donor-Advised Fund Gifts Are Unrestricted, Fidelity Says

The average donor at Fidelity Charitable, the nation’s largest provider of donor-advised funds, opens a fund at age 54 and makes almost seven grants a year, worth an average of $3,773 apiece, according to a new report that shows for the first time the giving patterns of Fidelity’s donors.

Fidelity Charitable prepared the report to give charities an inside look at its donors so that fundraisers could have better insights into how to tap into donor-advised funds, says Sarah Libbey, Fidelity Charitable’s president.

Donor-advised funds allow people to establish a charitable account in exchange for an immediate tax deduction. The donors can then choose when to identify charities to receive grants from the funds.

Fidelity Charitable, which has $9.9-billion in assets and 57,000 funds, has more assets and donors than any other advised fund, according to The Chronicle’s latest rankings.

Unlike foundations, donor-advised funds are not required to disclose information about grants made, nor do donors face any minimum requirement for the amount they must distribute annually.

Many With No Strings

The study found that many donors make gifts without strings. In 2012, 42 percent of grants from the funds were unrestricted, up from 37 percent in 2008. Charities prize unrestricted gifts because they use them for operations rather than specific projects.

Also in 2012, 21 percent of grants were scheduled in advance or set up for distribution on a recurring basis, up from just 17 percent in 2008.

“Those increases are very heartening,” Ms. Libbey says. “You hope that donors are becoming educated about the fiscal realities that many nonprofits are facing. An unrestricted gift can be very helpful in a financially troubled time.”

Where Gifts Go

The Fidelity study found that while its donors give to a wide variety of organizations—some 160,000 charities have received donations from the fund since it was created in 1991—they’re most likely to support groups that are close to home. Fifty-seven percent of grants went to nonprofit groups in the primary account holder’s home state.

Religious groups received a larger proportion of grants, 27 percent, than any other type of group. But as the size of a donor’s account rises, the donor becomes more likely to give to other types of charities. As a result, educational organizations received 26 percent of the $1.6-billion that donors distributed from their funds in 2012, more than any other type of group received.

Funds Are Active

The lack of payout requirements has led some critics to suggest that the funds are little more than tax shelters. But Ms. Libbey said she thinks the findings show that is not the case.

Of funds that were established before 2007, some 22 percent were virtually extinguished by the end of 2012, with remaining balances of $200 or less.

Seventy percent of the remaining funds had distributed money in five of the previous seven years, and the other 30 percent were still relatively active, making grants amounting to 69 percent of their total contributions by 2012.

More than $900-million, more than half of the total that Fidelity Charitable paid out in 2012, went to charities in grants sized at $50,000 or more.

“Our donors’ activity is very robust and strong,” Ms. Libbey says. “These are donors all charitable organizations need to make sure they’re speaking to when they’re making solicitations.”