26th March 2020
A Donor Advised Fund (DAF) is a named, ring-fenced, charitable account within Prism the Gift Fund, itself a registered charity. A Donor Advised Fund follows the same premise as a foundation and can be named as such under the auspices of Prism the Gift Fund.
Donor Advised Funds provide a tax-efficient alternative for High-Net-Worth and Ultra-High-Net-Worth individuals’ giving, without the ongoing and set up costs associated with establishing a standalone charitable structure. Donor Advised Funds are a simple, time and cost-effective alternative to a private grant-making foundation and donors have the joy of giving without the legal burden, costs and responsibility of operating a foundation.
The Donor Advised Fund provider, such as Prism the Gift Fund, takes on the governance and compliance on behalf of its clients. Prism the Gift Fund’s Board of Trustees oversees the charities activities. It gives donors peace of mind that they are operating in accordance with UK charity law. Prism the Gift Fund targets the mid-upper end of the market and offers a flexible, efficient, personable service to clients.
What Can I Do with My Donor Advised Fund?
- Donor Advised Funds provide the donor with anonymity (should they want it) over onward grants that are sent swiftly to their suggested charities
- A DAF gives a donor flexibility to make grants to causes all around the world.
- A DAF at Prism the Gift Fund can make grants to a charity, exempt body, not-for-profit and social enterprise around the world.
- Each client has a Relationship Manager who looks after their personal giving.
- Donors can nominate a successor on their DAF and give another individual authorisation to request grants from the DAF too.
- Donors can also have a balance of assets that can be managed by an investment manager of their choice.
What Can I Gift with My Donor Advised Fund?
- Prism the Gift Fund has a dynamic gifting proposition. Donors are able to donate a variety of assets to their DAF which each have their own associated tax relief for qualifying individuals;
- Cash – which comes with the best-known UK charitable tax relief: Gift Aid. Click here to use our Gift Aid calculator to see what your donation could be worth. For example, a donation of £100,000 becomes £125,000 after application of Gift Aid. This would cost a 45% taxpayer £68,750 after making a Gift Aid reclaim on their tax return.
- Shares – Donors can make gifts of shares listed on any stock exchange to charitable causes. Gifts of shares come with tax incentives: not only are the gifted shares not liable to Capital Gains Tax, but the donor can also claim full Income Tax relief at their highest rate. Donors can also choose to ‘gift the gain’ on the shares and don’t have to sell the shares; their charitable pot can be contributed to by annual dividends from the shares.
- Open-ended investment company (OEIC) and Unit Trusts – on gifting these types of assets to Prism the Gift Fund, we become a shareholder in the structure itself, drawing down the dividends when the donor wishes to make a cash donation.
- Property and Land– a powerful tool with estate planning where the property can be sold on donation to the charity or the rental income attributed to their Donor Advised Fund. The same tax breaks apply to gifts of property as gifts of shares, so the donor is not liable to Capital Gains Tax but can also claim full Income Tax relief at their highest rate.
- Cryptocurrency – Prism the Gift Fund are in the trialling stage for accepting crypto donations.
- Legacy Giving – donors can create a DAF in their will, nominate a successor and if they’ve left 10% or more to charity will be taxed 36%, instead of 40%, Inheritance Tax.
- Prism the Gift Fund removes the administrative burden of ensuring that donors are claiming all the relevant UK tax reliefs on any gifts made into the DAF.
Can I Invest with My Donor Advised Fund?
- A DAF at Prism the Gift Fund enables donors to select where to have a balance of assets managed. This is often where their personal wealth is held, and so their philanthropy pot can grow.
- A DAF at Prism is flexible; a donor can choose to impact invest from their DAF at Prism.
Can I Involve My Children in A Donor Advised Fund?
- Engage the Next Generation – A DAF at Prism enables the second, third and fourth generations to be included in the family philanthropy.
- Next-Gen engagement can be as simple as under 18s presenting different charities they want to support to their parents at an annual ‘Quasi Board’ meeting.
- Often, there isn’t room on the main family foundation for the next-generation to be trustees. Prism the Gift Fund have created family giving circles so that family members can come together and either each donate an amount to the DAF or have an amount allocated to it from the larger family foundation. As a group, they decide where, how, and what they want to give to. Prism the Gift Fund can hold ‘Quasi Board’ meetings and help sort through applications, discuss project proposals and budgets and administer the groups’ giving.