DAF 101: What is a Donor-Advised Fund?
If your clients are looking for an efficient, cost-effective, and easy way to increase their philanthropy, a donor-advised fund (DAF) may be your answer. Once established, a DAF provides the donor with immediate tax benefits and enables the donor to support charitable organisations anywhere in the world.
What is a DAF?
A DAF is a philanthropic fund established by a donor at a sponsoring charitable organisation, such as NPT UK, that administers the fund on behalf of the donor. The donor contributes assets (cash, shares, other forms of assets) to NPT UK, establishes and names the fund, and receives applicable tax benefits—such as Gift Aid for UK taxpayers, additional claims for higher rate taxpayers, and income tax relief for gifts of shares. Once the fund is established, the donor recommends grants to charitable organisations anywhere in the world.
How Your Clients Can Increase Their Philanthropy
Once the DAF is established, it is easy for your clients to support the charities important to them. They may access their DAF account online and recommend grants to charitable organisations anywhere in the world. Your clients can recommend one-time grants or regular grants (monthly, annually, etc.) with one action online. NPT UK takes care of all the grantmaking administration, including verifying charitable organisations and their work. Your clients can also recommend grants internationally, and NPT UK will take care of all the global grant due diligence required from a UK regulatory perspective.
How does a DAF work?
Your clients can open a DAF within a few days. Once the DAF is open, your clients can make an irrevocable contribution of assets to the account at NPT UK. Cash or appreciated assets are most commonly contributed, and NPT UK can also accept a wide range of asset types, including offshore assets. Your clients name their DAF at NPT UK (such as the John and Mary Smith Fund or the Smith Family Charitable Fund) and appoint advisors to the account, as well as any successors. Your clients can also recommend investing the DAF assets so that they can grow tax-free, enabling even more philanthropy over time.
NPT UK issues a gift receipt for each contribution into the DAF. For donors with tax consequences in both the UK and the US, NPT Transatlantic can provide both UK and US gift receipts.
Investment Options
NPT UK and NPT Transatlantic have a selection of investment options to enable your clients’ charitable contributions to grow over time, including impact investment options. For DAFs with a balance greater than £500,000, donors may recommend that their DAF is managed by an investment manager of their choice.
Philanthropy Made Easy
A donor-advised fund is a cost-effective, efficient, tax advantaged way to help donors support charitable causes anywhere they want to. Learn more about DAFs and philanthropic trends on our website. For further information, please contact NPT UK, and our advisors will be happy to help.
About the Author
Natalie Pinon is Executive Director, Development at NPT UK. She has over 15 years of experience working with philanthropists and impact investors to manage their giving.
NPT UK does not provide legal or tax advice. This blog post is for informational purposes only and is not intended to be, and shall not be relied upon as, legal or tax advice. The applicability of information contained here may vary depending on individual circumstances.
NPT UK is not affiliated with any of the organisations described herein, and the inclusion of any organisation in this material should not be considered an endorsement by NPT UK of such organisation, or its services or products.
