By Ken Nopar, VP-Senior Philanthropic Advisor
AEF donors continue to be very generous. In spite of the drop and volatility in the markets, the number of grants AEF donors have recommended this year has already increased by 16%. This is on top of the 25% increase in grants in 2021. These numbers can largely be attributable to the generosity of our donors who have responded to various crises as well as their ongoing desire to support their favorite charities.
Many non-profit organizations are very concerned this year about their fundraising forecasts for the year, largely because of market uncertainty and increased demand for their services. Additionally, smaller-level donors are contending with high inflation and some may not contribute as much or at all. While charitable giving may be a top priority for them, if they have less, the concern is that they will give less.
Fortunately, many HNW or UHNW clients who have established donor advised funds have already allocated assets for giving and will therefore maintain or even increase their giving, but it may not be enough to counter others who must reduce their giving. During the past few years, charities have been especially grateful for the support that they received from DAF donors. Without this generosity, some of these charities may not have survived, helped as many people as they did, or advanced their missions.
Though charities welcome donors’ grants at any time of the year, they are very thankful for those that they receive earlier than the end of the year. The demands upon them exist throughout the year, yet they receive a significant amount of their funding at year-end. One study determined that over one-quarter of non-profits raise nearly 26%-50% of their entire annual budget at the year-end.
Fortunately, AEF donors recommend their grants throughout the year with only 22% during December, which is a lower percentage than overall donors. However, that still amounted to over $134 million in 17,620 AEF grant recommendations during December of last year.
With so many grants in December alone, all grant recommendations are processed on a first in first out basis, and some grants to new charities may require additional vetting. Unfortunately, this means that some grants made late in the year, yet still before the granting deadline, may be sent to the non-profit organizations before year-end but may not be received by or processed by the charities until the new year.
It is therefore important to encourage clients to not wait until December or even November to recommend their grants. This is especially important for clients who have established their donor advised fund accounts within the past year or two and who may still think that they need to send grants in December. Many still think that they get a tax deduction when they send out the grant and forget that they already received the tax deduction when they contributed to AEF.
Some donors want to respond to the year-end appeals of their favorite charities, especially since the holiday season is a time of giving and generosity. However, many wealthy donors who have DAF accounts realize that if they plan and recommend their grants earlier in the year, they can have an even greater impact and that these generous contributions are appreciated even more by the organizations they support.
At American Endowment Foundation, we look forward to helping advisors and their clients determine the best strategies for charitable giving. Please contact us or call at 1-888-966-8170 with any questions.