Why Your Clients Should Choose a DAF

Donor-advised funds (DAFs) have become the UK’s fastest growing philanthropic vehicle, thanks to their simplicity, efficiency and immediate benefits. But what does that mean in practice? In this blog, we break down the benefits of a DAF and explain why your clients should consider using this vehicle for their charitable giving.

Let’s start with the essentials.

What is a DAF?

A DAF is a philanthropic account set up under an umbrella charity, like NPT UK, that administers the fund on behalf of the donor.

How does a DAF work?

A donor makes a charitable contribution to the DAF and then recommends grants to qualified charities from the fund in the short or long term.

Why choose a DAF?

Simplified charitable giving. Unlike a foundation, a DAF can be set up in just a few days. Once the DAF is established, clients can start recommending grants straightaway. The DAF provider takes care of the administration for clients and assumes all regulatory work, due diligence and reporting – responsibilities that would fall to the donor if they were to set up their own charity.

Freedom of choice. The flexibility of DAFs enables donors to support multiple causes all over the world from one vehicle without the burden of the administrative constraints that can come with managing one’s own charitable organisation. In addition, NPT UK accepts a wide range of contributable assets, including cash, shares, business interests or other assets such as property and art.

Investment for goals. Once established, donors may recommend an investment strategy for the assets within the DAF to meet their individual giving goals. NPT UK offers a wide selection of pre-approved investment strategies to help donors grow their funds in line with the causes they believe in. This also benefits beneficiary charities, as DAF assets must always be used for charitable purposes. When investments are made in ventures aligning with one’s philanthropic values, this practice is known as impact investing.

Benefit from tax relief. DAFs offer multiple tax benefits to help clients manage their charitable giving. Benefits include Gift Aid for UK clients, additional claims for higher rate taxpayers and income tax relief for gifts of shares. If your client pays tax in the US and UK, NPT Transatlantic provides a tax-effective, dual-qualified DAF. For more information on all the tax benefits visit our Tax Advantages page.

Managing a wealth event. Many donors will set up or contribute to a DAF when a significant liquidity event occurs, such as an initial public offering, bonus or inheritance. This allows for immediate tax relief while providing donors with time to strategize their giving.

Supporting legacy planning. As wealth is transferred, your clients may wish to include their family in their philanthropic activities as a way to pass on core values and share the experience of philanthropy. A DAF offers a flexible solution that can allow the next generation to develop their own giving strategy.

To learn more about how NPT UK can support your clients’ philanthropy, please contact us.

About the Author

John Canady, CEO of National Philanthropic Trust UK, has 25 years of experience working across the business, nonprofit and government sectors. He specializes in creating and managing philanthropic funds for donors and family offices around the world who wish to base their philanthropy from the UK.