Why Wealth Events Are Key Moments to Talk About DAFs

Many advisors will speak to clients annually to review their charitable giving strategy and ensure their philanthropic goals are being met. However, advisors should also be aware of the important moments outside of this annual conversation, when your clients will have the opportunity to translate an event or change in their lives into support for their philanthropy.

Wealth events and changes in income are two such vital opportunities.

Many donors choose to set up a donor-advised fund (DAF) when a significant liquidity event occurs, such as an initial public offering, bonus, sale of a business or inheritance.

Here are a few reasons why:

Tax efficiency: Setting up a DAF is a tax-effective way to set aside philanthropic capital during a wealth event. As DAFs are managed by registered charities, your client will be eligible to receive income tax relief, capital gains tax relief or inheritance tax relief by contributing to their DAF, assuming they are UK taxpayers.

Flexibility: Not only would your client be eligible to receive an immediate tax deduction, but they would also have time to consider how best to distribute their giving over time. Once donated to the DAF, the assets are ringfenced for future charitable giving whenever your client is ready.

Investment potential: Funds from a wealth event that are contributed to a DAF can be invested to grow tax-free, increasing the amount available for future grants to charities.

Handling complex assets: Your clients may also be able to donate privately held company stock, a private equity interest, artwork, property, pre-IPO shares or other illiquid assets. Many charities are not equipped to handle these complex gifts, but DAF sponsors like NPT UK have the expertise to help, making them a great option to maximise charitable giving.

Legacy planning: A significant wealth event is also a moment to consider longer-term estate planning. If your client wishes to set up an endowed gift to build their giving legacy, their successors can carry out their giving plan.

Establishing and contributing to a DAF during a wealth event can maximize the tax benefits of charitable giving, provide strategic flexibility to a philanthropic plan and contribute to long-term financial and legacy planning. Your clients’ wealth events are an opportune time to discuss the benefits of DAFs.

To find out more, contact us.

About the Author

John Canady, CEO of National Philanthropic Trust UK, has 25 years of experience working across the business, nonprofit and government sectors. He specializes in creating and managing philanthropic funds for donors and family offices around the world who wish to base their philanthropy from the UK.