23rd August 2019
A fully Tailored Philanthropy Solution
Donor Advised Funds (DAFs) are charitable accounts, administered by a charity, that are a time, cost and tax-effective alternative to having a foundation.
A DAF gives donors the joy of giving without the burden of operating and administering a foundation. With over £40 million raised in the year 2017-2018 and because of Prism’s expertise and extensive knowledge of grant administration, this enabled £32 million to be distributed to charities around the world*.
Before considering creating your own trust or foundation, why not explore setting up a DAF instead?
Here are four vital things you need to know about Donor Advised Funds:
1. Donor Advised Funds are on the rise
With over £110 billion under management in the USA DAF market, the DAF has become one of the most popular vehicles utilised for philanthropic giving.
In the UK, Donor Advised Funds are still not widely known, but awareness is growing. Wealth managers and large legal and accounting firms are adopting DAFs as a tool for their clients, recognising how these charitable accounts are increasingly the way forward in terms of the best option for the client and whereby the advisor can and does play a role in the client’s philanthropy.
2. Donor Advised Funds are hugely efficient
The trend of donors using DAFs as a viable, tax-effective, alternative to a charitable trust or foundation has grown as the demand for an efficient, flexible and cost-effective structure increases.
A Donor Advised Fund can be set up immediately, benefiting from immediate tax relief, and donors can then make gifts to charities all over the world. DAFs are extremely cost-effective. Most DAFs are free to set up and cost on average 1/5 of the price of setting up, running and administering a foundation.
3. Donor Advised Funds give you, the donor, peace of mind
With a Donor Advised Fund, the compliance, governance and due diligence are taken on by the charity’s trustees. The regulations of the Charity Commission and HMRC have increased in recent years.
UK Charities are now required to have a number of policies in place, such as Privacy, Whistleblowing and Safeguarding to name a few, and keep abreast of the strict rules on making gifts to charities in the UK and overseas.
A DAF removes the onerous responsibility of being a Trustee so donors can enjoy making gifts without the administrative burden of running a foundation.
Donors can make gifts of cash, shares, property, art and even cryptocurrencies to their DAF; with all the relevant tax relief where eligible such as Gift Aid on cash donations, no Capital Gains tax on shares and full Income Tax relief on gifts of shares and property.
Use our Gift Aid calculator to see what your donation would cost after tax relief. A DAF can be utilised for gifts left in a will and are a simple way of succession planning for the next generation.
With a DAF, donors can make donations anonymously if they wish or they can name their account like they would a foundation. No clients are listed in the DAF provider’s annual charity accounts, which avoids unsolicited applications to the trust.
* This was the figure at Prism’s year-end: June 2018.