(Dow Jones) Donor-advised funds are coming up more often in financial adviser Timothy Parker's discussion with clients about charitable giving.

It isn't as popular a strategy as simply giving appreciated stock, says Parker of Midland Park, N.J. But he says he often likes to recommend donor-advised funds because of their flexibility.

He isn't alone. Growth in donor-advised funds is outpacing that of several other charitable vehicles. According to a recent National Philanthropic Trust report, the number of donor-advised funds grew 3% to 152,365 in 2009 from the prior year. In contrast, the number of private foundations grew 0.5% to 75,595.

Private foundations still hold the lion's share of the assets among charitable vehicles, clocking in at about $583.4 billion in 2009, according to National Philanthropic Trust. Foundations' assets dwarf those of donor-advised funds, which saw a 12.7% drop in total assets in 2009 and totaled about $25.2 billion.

Donor-advised funds are charitable giving vehicles administered by a third party such as Schwab Charitable and invest assets and make grants based on the donor's wishes

National Philanthropic Trust believes donor-advised funds rebounded in 2010 and will perform "strongly" in 2011 but assets still may not reach their peak 2007 values of roughly $29.4 billion.

As the economy continues to improve and donors have clarity on tax policy for roughly the next two years, the funds are expected to grow in popularity, assets and the number of grants they issue to end-user charities.

And the flexibility that Parker cites is expected to be a factor. A fund can be opened online these days with as little as $5,000 and provide clients an immediate tax deduction. A client who opens a fund on Jan. 1 can wait until Dec. 31 to decide how much and to which charities to grant money.

Several of the major donor-advised funds allow advisors to take an active role in the accounts of clients with donor-advised funds worth $250,000 or greater.

"Donor-advised funds make sense for the right situations," Parker says. For clients who have sold a business or property resulting in large capital gains, they can be "ideal" vehicles to reduce the client's immediate tax burden, he says.

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