Your charity is not alone in facing a challenging funding landscape with fewer people giving while demand for services continue to rise. However, one method of charitable giving that has grown steadily over the last few years is the Donor Advised Fund (DAF).
As a charity, you may be wondering: What are DAFs, and why are they popular with major donors? This article answers these two questions.
How do Donor Advised Funds work?
A DAF is a giving account managed by a provider. Legal control of the funds rests with the provider, which administers and distributes grants in line with its policies. A donor makes an irrevocable contribution to their DAF account and can then request that the provider makes donations to charities of their choosing.
This means that while your donor for fundraising and stewardship purposes will be the person who requested that a donation was made to your charity, legally, the donor is the DAF provider, and the funds your charity receives will come from the provider’s bank account.
Donations from DAFs are not eligible for Gift Aid, as the donor is not the individual, but the DAF provider, this applies even if you hold a signed Gift Aid declaration from the original donor. Any eligible tax relief has usually already been claimed at the point the original donor makes a contribution into their DAF.
Some providers offer advisory support to help donors clarify their values and identify organisations that align with their giving goals. For further information, see our guide and you can find a list of all UK DAF providers here.
What attracts major donors to DAFs?
- Administrative simplicity: The provider manages the account, paperwork, and compliance, reducing the donor’s workload.
- Security and due diligence: Providers check and verify charities before grants are made, offering reassurance to donors.
- Strategic advice: Some providers offer expert guidance to help donors shape their giving.
- Long-term planning: DAFs allow donors to set aside funds for future giving, involve family members, and plan for a legacy.
- Tax efficiency: Eligible contributions may receive tax relief, and gifts to DAFs are irrevocable.
- Flexible asset options: Donors can contribute cash, shares, and other assets, depending on provider policies.
There is no one-size-fits-all approach to DAF donors. Understanding each individual donor is as important as understanding the giving method.
Our next article explores who uses DAFs and what fundraisers should know.