Why use a Donor Advised Fund to leave your charitable gift?
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A Donor Advised Fund (DAF) is your own charitable giving fund managed under the umbrella of a registered charity. You can make tax-efficient gifts into your DAF and then recommend grants from your DAF to charitable causes. It’s like having your own charitable foundation, but without the legal and administrative burdens of trusteeship.
So, what are the advantages of using your DAF to facilitate your charitable legacy?
Flexibility
A DAF makes it easy to remember charities in your Will. Your Will can include just one gift to your DAF, rather than separate gifts to different charities. You can then provide an expression of wishes, which is a document telling the DAF provider how you would like your legacy to be used.
You can change your expression of wishes at any time, without the cost or inconvenience of amending your Will. Some DAF providers will even contact you on a regular basis to ensure that your expression of wishes is still up to date.
Your expression of wishes might list a number of charities, together with the proportions in which you’d like your legacy to be distributed.
Alternatively, you might want to pass on a legacy of philanthropy by using your gift to fund DAFs for friends or family members, so that they can request grants to their favourite causes. We’re seeing an increasing number of donors who want to pass on their DAF to the next generation as part of handing on their family values and traditions.
Discretion and optional anonymity
Your Will becomes a public document after your death, whereas an expression of wishes to your DAF provider remains private. This means that the ultimate distribution of your DAF legacy remains a private matter.
You can ask the DAF provider to share your name with recipient charities, or to make the grants anonymously.
Tax-efficient cross-border giving
What if you’d like your legacy to support an overseas charity? A direct legacy to a non-UK charity would not qualify for relief from UK inheritance tax.
Instead, you can leave a legacy to your UK DAF with an expression of wishes in favour of the non-UK charity.
This ensures that your legacy will be free of UK inheritance tax and your estate may even benefit from the reduced rate which applies when you leave 10% or more to charity – see more here.
If you are a dual US/UK taxpayer subject to both US estate tax and UK inheritance tax, leaving your legacy to a dual-qualified US/UK DAF can ensure tax relief in both countries.
Simplify the administration of your estate
In administering your charitable gift, your executors will have a single point of contact with the DAF provider. This should be simpler and more cost-effective than having your executors liaise with multiple charity legacy teams.
Ease the burden on smaller charities
Many large charities have well-established legacy management teams. But what if you want to support a small charity or to leave a gift of more complex assets such as shares or properties?
DAF providers have the technical expertise to manage complex legacies and then distribute the proceeds in line with your expression of wishes, maximising the amount which ultimately strengthens your chosen causes.
Start your legacy today
At Stewardship, we love to support our donors in experiencing the joy of giving while living. A DAF is a low-cost vehicle to explore and develop your philanthropy, building long-term relationships with your favourite causes. Your legacy can then act as the culmination of your giving journey, defining how you want to be remembered.
Rachel Steeden is an experienced private client lawyer now working in-house at DAF provider Stewardship to help (U)HNW donors make effective and tax-efficient gifts.
