Donor Advised Funds
DAFs allow donors to build up a fund over time and gain tax relief as they top it up.
Donations into Donor Advised Funds (DAFs) and their British equivalents in the UK hit more than £370 million last year and have the potential to reach £1 billion by 2025/26, according to recent research.
A report last year by Charities Aid Foundation (CAF) and UK Community Foundations shows donations into the funds were up from £246 million in 2013/14. Donor advised funds and their British equivalents allow people to donate cash, shares or other assets into a charitable fund, claim tax relief on their contribu- tions and then donate the funds out to charities as and when they wish to. Around 75% of the money taken into these funds was quickly paid out to charities, although some donors choose to invest and grow their funds over the long-term, much like tra- ditional foundations.
The UK and US have a rich heritage of charitable giving and DAFs are an excellent example of this shared culture, having originated in the US in the 1930s. Since then, variations on the American DAF concept have arrived in the UK; with the first one being the CAF Charitable Trust in the 1970s, and commu- nity foundations in the 1990s. Donor advised giving funds are an increasingly significant source of funding for charities working to improve people’s lives around the world, having granted out al- most £280 million in the UK in 2015/16.
Some providers, like CAF, cater for donors such as dual UK/US taxpayers or those who wish to lend, as well as donate, to chari- ties. CAF pioneered dual tax-effective DAFs in the 1990s, with the launch of the CAF American Donor Fund, meaning that donors can give to charities around the world and claim tax re- lief both in the UK and US. This structure has proven very pop-
Donor advised giving funds are an increasingly significant
source of funding for charities working to improve people’s lives around the world
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ular with Americans in the UK who wish to give to causes close to their hearts in the UK and back home in the US.
DAFs allow donors to build up a fund over time and gain tax relief as they top up the fund. Many donors are increasingly preferring DAFs to setting up their own foundations as DAF providers take on the responsibility for compliance and report- ing, allowing donors to focus on the giving rather than the ad- ministration. Many DAF providers allow their funds to be managed by future generations, enabling the donor to engrain a culture of giving in their family and meaning the DAF can con- tinue in perpetuity.
UK DAFs benefit from the UK Government’s Gift Aid scheme which means that cash donations into a DAF receive a 25% up- lift from HMRC; this is added to the DAF and can be given to charities around the world. Many DAF users also appreciate the ability to donate to charities anonymously and can pick and choose whether some donations are anonymous.
Many DAF providers offer the option to make one-off dona- tions with no ongoing commitment, which can be an excellent way to try out dual tax-qualifying giving. DAFs can often be set up with as little as £5,000, meaning it has never been easier to start using this flexible method of giving. CAF will be publishing a new report on Donor Advised Funds this winter to highlight any changes to trends and to continue to measure growth.
Mark Greer is Senior Manager of the CAF American
Donor Fund. For more information on the CAF American Donor Fund and to download a copy of the report, please visit
www.cafonline.org/cadf
CAF American Donor Fund registered charity number 1079020.
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