Five Things Your Clients Should Know About DAFs

Donor-advised funds (DAFs) provide donors with an efficient, simple and cost-effective way to carry out their philanthropy. The donor establishes a DAF account at an umbrella charity, such as NPT UK, and then makes a charitable contribution to the DAF. The donor receives immediate tax benefits and can recommend grants to qualified charities over time.

DAFs have become the UK’s fastest growing philanthropic vehicle and provide donors with an alternative to setting up their own grantmaking trust or foundation. The umbrella charity provides all the administrative and financial management, while the donors concentrate on their philanthropic goals.

Here are five reasons why a DAF may be a good choice for your clients:

 

1. Cost-effective alternative to a private trust or foundation

DAFs are quick to establish and easy to use, as the DAF provider does all the administrative and regulatory work – such as due diligence on grantees and reporting responsibilities. In comparison, an independent grantmaking charity established by a donor entails significant administrative costs and obligations, which are all the responsibility of the donor. In addition, setting up an independent charity takes time – in the UK, this requires registration with the Charity Commission, which often takes many months.

 

2. Multiple tax benefits

Your clients can make contributions to their DAF in the form of cash, shares, business interests or other assets such as property and art. Donors then receive the relevant tax benefits, such as Gift Aid for UK taxpayers, additional claims for higher rate taxpayers and income tax relief for the gifts of shares. If your client pays taxes in both the US and UK, opening a DAF at NPT Transatlantic, a dual-qualified US/UK charity, provides both UK and US tax benefits. For more information on all tax benefits, visit our Tax Advantages page.

 

3. International and specialised grants

With a DAF at NPT UK, your clients can recommend grants to charities around the world. NPT UK provides all the additional administrative and regulatory work required for international grantmaking, enabling the donor to focus on philanthropic goals, not legal requirements.

 

4. Investment options

Your clients may recommend that the DAF assets are invested so that they can grow, tax-free, before being granted out. 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 want to support. For higher value DAFs, your clients may also recommend an investment manager of their choice.

 

5. Legacy planning

A DAF can be part of a philanthropic legacy that your clients can build with their family members to pass on their values and share the experience of charitable giving. A DAF offers a flexible way to allow the next generation to be included in family philanthropy, or to 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.