Foundations and charitable trusts are powerful giving vehicles but can be costly and time-consuming to maintain.
NPT UK can help you convert your foundation or charitable trust to a donor-advised fund account with less overhead and increased grant flexibility. Your foundation or charitable trust’s administrators can act as advisors and successors to the DAF in perpetuity. You can even keep the name of your foundation or charitable trust intact. Alternatively, DAFs can operate alongside your existing foundation or charitable trust as a complementary vehicle. Ask us how you can use them together to maximise your tax benefits and achieve your philanthropic goals.
NPT UK Donor-Advised Funds
Foundations/
Charitable Trusts
Start-Up Time
Immediate
Can take several weeks or months. Must apply to the Charity Commission, HMRC and potentially Companies House, and appoint a Board of Trustees
Start-Up Costs
None
Legal (and other) fees are typically substantial
Ongoing Administrative and Management Fees
85 basis points (0.85%) or less, plus investment management fees
Can be considerable given administrative, legal, accounting, audit and reporting costs
Tax relief on gifts (cash, shares, etc.)
All eligible UK tax reliefs.
All eligible UK tax reliefs.
Establishment Minimum
£250,000
No minimum requirement, but typically £750,000+
Charitable status
Covered by NPT UK's charity status
Registered with the Charity Commission
Privacy
Names of individual donors can be kept confidential if desired, and grants can be made anonymously
The charity must keep public records
Administrative Responsibilities
Recommend grants to favourite charitable causes
Manage assets, keep records, select charities, administer grants, maintain board minutes and fulfil reporting requirements.
Reporting requirements
NPT UK undertakes reporting to the Charity Commission, Companies House, etc.
Must report to the Charity Commission, Companies House, etc.
DAF Advantages and Limitations
1
Start-up and Administration
2
Donor Control and Grantmaking
3
Taxes and Investments
4
Privacy
5
Legacy
Donors can establish a DAF immediately at a low cost; charitable sponsors require the donors to complete an application and make an initial contribution. Minimum initial contributions for DAFs range from £10,000 to £250,000. This stands in stark contrast to private foundations and charitable trusts, which can take months to establish and require significant time and financial investment, due largely to legal fees.
Once established, DAF charitable sponsors handle all administrative work, including managing investments, recordkeeping, tax receipting and grant administration. This allows the donor to focus on their charitable goals. An independent charitable legal entity, by contrast, must hire staff or ask outside advisors to manage the varied administrative work and tax matters for the entity. They must also form a board, hold board meetings and record minutes, file tax paperwork, and perform other governance duties, sometimes at great expense.
Donor control is one of the key differentiators between DAFs and other giving vehicles. When donors make contributions to their DAFs, they are gifting those assets irrevocably to a public charity. Once accepted, the sponsoring charity owns them in their entirety.
The term donor-advised fund is reflective of this relationship: donors have only advisory privileges to grant the assets in their DAF, and the charitable sponsor has the authority to approve or deny those recommendations. Foundations and charitable trusts do not have this kind of restriction, allowing donors to control grants to qualified charities.
Like most other charitable giving vehicles, there are restrictions on which organisations qualify as eligible recipients for DAF grants. For example:
Donors cannot recommend that charitable grants be made to individuals.
Donors cannot receive any goods or services in exchange for their grant, like a ticket to a gala.
Donors cannot recommend that grants pay tuition to private schools or colleges.
Similar rules apply for private foundations.
DAFs offer the maximum tax benefits allowed by law. Donors receive an immediate tax benefit when contributing to their DAF. Each individual tax situation is different, which is where advisors can play an important role in helping donors decide which is the best giving vehicle for them.
Investment offerings for DAFs vary widely among charitable sponsors. The assets in DAFs legally belong to the charitable sponsor, so they assume all the risk related to managing and investing the assets. This arrangement also means that donors could have less flexibility in selecting investments. Some charitable sponsors provide only a few investment offerings, while others allow donors and their financial advisors to create a charity-approved more customised portfolio.
Foundations and charitable trusts, alternatively, offer donors full control over how the assets are invested and the entity is governed within the confines of the law.
Invested DAF assets can grow tax-free, which means that over time—and with positive returns—more assets are available for charitable purposes than what was originally contributed.
DAFs are the only charitable giving vehicle that allows donors to make grants 100% anonymously. When charitable sponsors administer grants on behalf of their donors, the charity is legally distributing its own assets, which means donors can choose to remain anonymous. Some donors choose to name their DAF after their mission (e.g. the “Fund for Early Education) instead of after themselves (e.g. the “John Doe Fund”).
This allows a donor’s DAF to be recognised publicly instead of being recognised using the person’s or family’s name. Foundations and charitable trusts, by contrast, must file annual reports that disclose members of their board, grant recipients, and other information that prevents them from remaining anonymous.
How an individual DAF will be advised in the future is determined by the charitable sponsor’s policies on succession planning. Some allow the donors to advise for only one generation, thereby passing the control of the DAF to the sponsoring charity after the death of the original donor. Others, like NPT UK, permit donors to appoint successors who receive the full advisory privileges on the original donor’s death, allowing the DAF to exist in perpetuity.
Similarly, most foundations and charitable trusts can be passed down through generations to ensure a family’s charitable giving legacy. However, some foundations choose to pay out the entire endowment during the life of the original donor.
Explore Your Options
Find out about other charitable giving vehicles.
When you're considering how to go forward with your philanthropy, it's best to look at what structures and services make the most sense for you. We offer philanthropic services to help you maximise your giving. Let us help you find what works.
Private foundations and charitable trusts are powerful giving vehicles but can be costly and time-consuming to maintain.
NPT Transatlantic can help you convert your foundation or charitable trust to a donor-advised fund with less overhead, improved tax benefits and increased grant flexibility. Your foundation or charitable trust administrators can act as advisors and successors to the DAF in perpetuity. You can even keep the name of your foundation or charitable trust intact. Alternatively, DAFs can complement your private foundation or charitable trust. Ask us how you can use them together to maximise your tax benefits and achieve your philanthropic goals.
NPT Transatlantic Donor-Advised Funds
Foundation/
Charitable Trust
Start-Up Time
Immediate
Can take several weeks or months. Must apply to the Charity Commission and potentially Companies House, appoint a Board of Trustees
Start-Up Costs
None
Legal (and other) fees are typically substantial
Ongoing Administrative and Management Fees
85 basis points (0.85%) or less, plus investment management fees
Can be considerable given administrative, legal, accounting, audit and reporting costs
Tax relief on gifts (cash, shares, etc.)
All eligible UK tax reliefs. In addition and for US taxpayers, NPT Transatlantic offers additional US tax deductions
All eligible UK tax reliefs. US tax relief would only be available if the Foundation is set up as a dual qualified structure
Establishment Minimum
£50K or $80K
No minimum requirement, but typically £750K+
Charitable status
Covered by NPT Transatlantic's charity status
Registered with the Charity Commission
Privacy
Names of individual donors can be kept confidential if desired, and grants can be made anonymously
The charitable foundation must keep public records
Administrative Responsibilities
Recommend grants to favourite charitable causes
Manage assets, keep records, select charities, administer grants, maintain board minutes and fulfil reporting requirements.
Reporting requirements
NPT Transatlantic undertakes reporting to the Charity Commission, Companies House, etc.
Must report to the Charity Commission, Companies House, etc.
DAF Advantages and Limitations
1
Start-up and Administration
2
Donor Control and Grantmaking
3
Taxes and Investments
4
Privacy
5
Privacy
Donors can establish a DAF immediately at a low cost; charitable sponsors require the donors to complete an application and make an initial contribution. Minimum initial contributions for DAFs range from £10,000 to £250,000. This stands in stark contrast to private foundations and charitable trusts, which can take months to establish and require significant time and financial investment, due largely to legal fees.
Once established, DAF charitable sponsors handle all administrative work, including managing investments, recordkeeping, tax receipting and grant administration. This allows the donor to focus on their charitable goals. An independent charitable legal entity, by contrast, must hire staff or ask outside advisors to manage the varied administrative work and tax matters for the entity. They must also form a board, hold board meetings and record minutes, file tax paperwork, and perform other governance duties, sometimes at great expense.
Donor control is one of the key differentiators between DAFs and other giving vehicles. When donors make contributions to their DAFs, they are gifting those assets irrevocably to a public charity. Once accepted, the sponsoring charity owns them in their entirety.
The term donor-advised fund is reflective of this relationship: donors have only advisory privileges to grant the assets in their DAF, and the charitable sponsor has the authority to approve or deny those recommendations. Foundations and charitable trusts do not have this kind of restriction, allowing donors to control grants to qualified charities.
Like most other charitable giving vehicles, there are restrictions on which organisations qualify as eligible recipients for DAF grants. For example:
Donors cannot recommend that charitable grants be made to individuals.
Donors cannot receive any goods or services in exchange for their grant, like a ticket to a gala.
Donors cannot recommend that grants pay tuition to private schools or colleges.
Similar rules apply for private foundations.
DAFs offer the maximum tax benefits allowed by law. Donors receive an immediate tax benefit when contributing to their DAF. Each individual tax situation is different, which is where advisors can play an important role in helping donors decide which is the best giving vehicle for them.
Investment offerings for DAFs vary widely among charitable sponsors. The assets in DAFs legally belong to the charitable sponsor, so they assume all the risk related to managing and investing the assets. This arrangement also means that donors could have less flexibility in selecting investments. Some charitable sponsors provide only a few investment offerings, while others allow donors and their financial advisors to create a charity-approved more customised portfolio.
Foundations and charitable trusts, alternatively, offer donors full control over how the assets are invested and the entity is governed within the confines of the law.
Invested DAF assets can grow tax-free, which means that over time—and with positive returns—more assets are available for charitable purposes than what was originally contributed.
DAFs are the only charitable giving vehicle that allows donors to make grants 100% anonymously. When charitable sponsors administer grants on behalf of their donors, the charity is legally distributing its own assets, which means donors can choose to remain anonymous. Some donors choose to name their DAF after their mission (e.g. the “Fund for Early Education) instead of after themselves (e.g. the “John Doe Fund”).
This allows a donor’s DAF to be recognised publicly instead of being recognised using the person’s or family’s name. Foundations and charitable trusts, by contrast, must file annual reports that disclose members of their board, grant recipients, and other information that prevents them from remaining anonymous.
How an individual DAF will be advised in the future is determined by the charitable sponsor’s policies on succession planning. Some allow the donors to advise for only one generation, thereby passing the control of the DAF to the sponsoring charity after the death of the original donor. Others, like NPT UK, permit donors to appoint successors who receive the full advisory privileges on the original donor’s death, allowing the DAF to exist in perpetuity.
Similarly, most foundations and charitable trusts can be passed down through generations to ensure a family’s charitable giving legacy. However, some foundations choose to pay out the entire endowment during the life of the original donor.
