DAF 101: Frequently Asked Questions

Are your clients are looking for an efficient, cost-effective, and easy way to increase their philanthropy? Would they like to focus on giving and not on administration? As a private client advisor, helping your clients navigate charitable giving can deepen relationships and add meaningful value to your services. Donor-advised funds (DAFs) have become one of the most popular philanthropy vehicles for private clients. Once established, a DAF provides your client with immediate tax benefits and enables them to support charitable organisations almost anywhere in the world.

Here’s a primer to help you confidently discuss DAFs with your clients.

 

What is a DAF?

A DAF is a philanthropic fund established by a donor at a sponsoring charitable organisation, such as NPT UK, which administers the fund on behalf of the donor. The donor contributes assets (cash, shares, or other forms of assets) to NPT UK; establishes and names the fund; and receives applicable tax benefits—such as Gift Aid for UK taxpayers, additional claims for higher rate taxpayers, and income tax relief for gifts of shares. Once the fund is established, the donor can recommend investments to grow the DAF balance, and can grant to charitable organisations nearly anywhere in the world.

 

How does a DAF help clients increase their philanthropy?

Establishing a DAF makes it easy for your clients to support the charities important to them. They may access their DAF account online and recommend grants to charitable organisations anywhere in the world. With a DAF, your clients can recommend one-time grants or regular grants (monthly, annually, etc.) with one action online. NPT UK takes care of all the grantmaking administration, including verifying charitable organisations and their work. Your clients can also recommend grants internationally, and NPT UK will take care of all the global grant due diligence required from a UK regulatory perspective.

 

How does a DAF work?

Setting up a DAF is straightforward and can be completed in a matter of days. Your client completes an application, choosing a fund name, account advisors, and any successor advisors. After the fund is open, they make an irrevocable contribution of assets—typically cash or appreciated securities. NPT UK also accepts a broad range of asset types, including alternative investments and offshore assets.

Donors can choose to recommend how DAF assets are invested, allowing the fund to grow tax-free and support even more philanthropy over time.

NPT UK issues a gift receipt for every contribution. For donors with tax obligations in both the UK and US, NPT Transatlantic provides dual gift receipts to accommodate cross-border tax reporting.

 

Do DAFs have investment options?

Yes. Your clients’ charitable contributions can grow over time, using the selection of investment options approved by NPT UK and NPT Transatlantic. Impact investment choices are available for donors who want to align their investments with causes like environmental sustainability, social equity, and strong governance.

For DAFs with a balance greater than £500,000, donors may recommend that the DAF assets are managed by an investment manager of their choice.

 

How can you help your clients get started?

You can help your clients establish a donor-advised fund easily and quickly, providing them with a cost-effective, efficient, tax advantaged way to support their charitable causes virtually anywhere. Learn more about DAFs and philanthropic trends on our website. For further information, please contact NPT UK, and our advisors will be happy to help.