Benefits of Donor-Advised Funds for US-Connected Donors

For individuals committed to philanthropy who pay taxes in both the United Kingdom and the United States, tax-efficient giving can be complex. A donor-advised fund (DAF) offers a flexible and efficient solution, and for US-connected donors, the right structure can deliver dual tax benefits.

A DAF is a charitable giving vehicle administered by an umbrella charity that allows donors to make charitable contributions, receive an immediate tax deduction, and then recommend grants from the fund over time. For your clients who pay taxes in both the UK and US, a DAF at NPT Transatlantic offers a unique advantage. NPT Transatlantic is an independent UK-registered charity that is also recognised as a US public charity for tax purposes. This means that your clients can benefit from tax relief in both jurisdictions. In the UK, contributions to NPT Transatlantic qualify for UK tax relief and in the US, those same contributions are treated as tax-deductible gifts to a US public charity.

Here is how you can help your dual-tax-paying clients advance their philanthropy through a donor-advised fund:

 

Contribute wide range of assets

Once your clients have established a DAF at NPT Transatlantic (which usually takes less than 48 hours), they may contribute a wide range of assets to their DAF. These include cash, appreciated shares, property, and complex assets such as alternative investments, restricted shares, privately held business interests, and publicly traded partnerships. Contributions qualify for both UK and US tax benefits. For example, cash gifts from UK taxpayers may benefit from Gift Aid relief, increasing the amount added to the DAF. Donating non-cash assets can help avoid capital gains taxes in both the UK and US.

 

Maximise charitable giving benefits

Your clients can optimise their tax advantages and philanthropic impact by making larger, less frequent contributions to a DAF. “Bundling” donations, combining two to three years’ worth of giving into a single contribution, allows donors to claim their charitable deductions and tax benefits immediately while making grants gradually over time. Assets within the DAF grow tax-free, with access to a range of investment options through NPT Transatlantic. Donors can even choose impact investment options, using their assets to support social and environmental causes before grants are made. For DAFs with balances exceeding £500,000, your clients can recommend that their funds be managed by an investment manager of their choice.

 

Make grants worldwide

Once the DAF is funded, your clients can recommend grants to charities virtually anywhere in the world. NPT Transatlantic conducts all the necessary due diligence on grant recipients, ensuring compliance with both UK and US grantmaking requirements. This means your clients can give confidently, knowing NPT Transatlantic manages all regulatory and reporting responsibilities.

 

Cross border single gifts

If establishing a DAF is not the solution for your clients at this time, NPT Transatlantic can facilitate cross-border giving through its designated fund single-gift programme. Donors can make one-time contributions to a designated fund earmarked for a specific charity. NPT Transatlantic provides donors with the appropriate US and UK gift receipts, performs grantmaking due diligence on the grantee, and transfers the funds, minus fees, to the charity.

For more information on how NPT Transatlantic can help support your clients’ charitable goals while navigating UK and US tax implications, contact us.