Five Reasons for Your Clients to Get Started with a Donor-Advised Fund

A donor-advised fund (DAF) is a philanthropic fund set up under an umbrella charity that administers the fund on behalf of the donor. DAFs have become the UK’s fastest growing philanthropic vehicles owing to their simplicity and efficiency. Many private clients use DAFs as an alternative to setting up their own grantmaking trust or foundation.

But how does a DAF work? A donor makes a charitable contribution to the DAF, receives immediate tax benefits, and then recommends grants to qualified charities from the fund in the short or long term.

Here are five reasons that make a DAF a compelling choice for your clients….

A streamlined alternative to a private trust or foundation

While setting up and operating an independent charity can be onerous, expensive and time consuming, a DAF is quick to establish, flexible and easy to use. The DAF provider, like NPT UK, takes care of all administrative and regulatory work, including due diligence on grantees and reporting responsibilities – duties that would fall to the donor if they set up their own charity.

Receive multiple tax benefits

Contributions to a DAF can include cash, shares, business interests or other assets such as property and art. Benefits may include Gift Aid for UK taxpayers, additional claims for higher rate taxpayers and income tax relief for gifts of shares. If your client pays tax in the US and UK, they can open a DAF with NPT Transatlantic, a dual qualified US/UK charity. For more information on all the tax benefits visit our Tax Advantages page.

Make international and specialised grants

Your clients can recommend grants to charities anywhere in the world from their DAF. This gives them the flexibility to give to multiple causes from one vehicle without the time or administrative constraints that can come with managing their own organisation, such as a charitable trust.

Choose from a variety of investment options

As well as making grant recommendations, donors can recommend how they wish their charitable contributions to be invested, tax free. NPT UK offers a wide selection of pre-approved investment options to help grow DAF assets, including impact investment options aligned with the causes donors believe in. For higher value DAFs, your clients may also recommend the investment manager of their choice.

Support legacy planning

As wealth is transferred, your clients may want to include their family in their philanthropic activities as a way to pass on family values and share the experience of philanthropic giving. A DAF offers a flexible solution that can allow the next generation to be included in family philanthropy or set up their own giving initiatives.

To find out more about how NPT UK can help your clients with a DAF visit www.nptuk.org

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.