16th September 2020
What is a Donor Advised Fund?
A Donor Advised Fund, commonly known as DAF, is a charitable account created under the ‘umbrella’ of a sponsoring non-profit organisation such as the UK registered charity Prism the Gift Fund (Prism). A Donor Advised Fund acts as an ‘Own-Name Foundation’ under the auspices of Prism where an individual can make a charitable donation (cash or assets including shares and property) in a time-, cost- and tax-effective way whilst retaining ‘advisory privileges’. The donor can advise where grants are disbursed for charitable purposes to charities, social enterprises, and not-for-profits around the world. Donor Advised Funds are an efficient alternative to private grant-making foundations and can also be used for corporate philanthropy too.
The History of Donor Advised Funds
Donor Advised Funds are philanthropy’s fastest-growing vehicles. The first Donor Advised Funds were created in the United States (US) in the 1930s, though they were not regulated until 1969 under the US Tax Reform Act. In the 1990s, they began to grow popularity and usage and today, grants from Donor Advised Funds account for more than 3% of all giving in the US. Current figures suggest there is $110 billion in assets in the US and that Donor Advised Funds are giving away nearly $20 billion per year there.
In the UK, Donor Advised Funds are not as well-known as they should be but are beginning to gather real momentum as philanthropy is becoming more important in financial planning for private clients and knowledge of these funds increases. In 2018: Contributions to Donor Advised Funds increased to £522 million, a 9% increase compared with the prior year’s contributions. These contributions composite 5.2% of total individual giving in the UK. Charitable assets in the fundsaccount for a total over £1.5 billion—an increase of 18% over the prior year. (NPT 2019 report).
Prism’s founder and CEO, Anna Josse, created Prism to increase the flow of funds into the charity sector. Having worked in the charitable sector herself for several years, Anna saw that there was an opportunity to make it easier for individuals and groups to give. Having researched the market for almost two years on how best to incorporate a Donor Advised Fund,within and abiding by UK charitable law, Anna drew on her learning from her work in the US, and their philanthropic giving trends, to create Prism– a UK DAF provider.
Anna set out to encourage charitable giving of high net worth individuals by offering a professional, swift and tax-efficient vehicle to give through. Prism was established in 2005 to administer the giving of groups, individuals, and foundations making significant gifts to charities around the world. In the year ending June 2020, Prism distributed £52million to charities around the world, had an income of £90million and is growing year on year.
Why use a Donor Advised Fund?
Donor Advised Funds act as a tax-effective UK hub for donor’s giving, without the ongoing and set up costs associated with establishing a standalone charitable structure. These accounts provide a flexible way to give money to charities or for charitable purposes without the legal burden of running your own foundation.
- Flexibility to give to charitable causes around the world
- Advisory privilege: Advise how the charitable pot is distributed, invested and with whom
- Administrative convenience (Prism provides the back-office support, ongoing administration and compliance and governance)
- No regulatory responsibility or oversight
- Ability to gift cash, shares, property, vintage cars, art, and rare books.
- A time, cost and tax-effective philanthropy solution (no setup cost or ongoing running costs)
- Complete anonymity (if required)