Donor advised funds: what UK fundraisers need to know
Free guide
A gift arrives from Charities Aid Foundation with no donor name on it. A supporter mentions that their giving goes through a fund. This guide explains what a donor advised fund is, how the money reaches your charity, and what to do differently when it does.
Written for fundraisers, income processing teams and charity leaders. No email address needed, no form to fill in.
What is a DAF?
A donor-advised fund (DAF) is an easy, flexible and tax-efficient way for individuals to manage their charitable giving. DAFs are charitable vehicles that hold and distribute funds which a donor would like to consider donating to charity.
How DAFs work
The DAF looks after all the administration and governance of charitable donations on a donor’s behalf. The DAF is registered with the Charity Commission, not the individual funds.
An account with a DAF is opened by an individual. That individual then directs the DAF to donate from their account to any registered charity in the UK or overseas, a CIC or any cause they desire, as long as the recipient individual/organisation passes the DAF provider’s due diligence checks.
The recipient is in contact with the DAF and not the donor. The recipient may not know who the donor is.
Why donors choose to set up a DAF
Easy to use
Donations can be made quickly and efficiently by logging into the DAF account and approving a transfer.
Tax relief
The donor gets tax deduction or relief immediately, in the year they make the contribution, even if the money is given away years later.
Flexibility
Complex assets such as shares or real estate can be donated without the administrative burden.
Simple
All administration is taken care of by the DAF provider, including claiming tax relief on the funds placed in the DAF and reporting to the Charity Commission.
What happens when a donor gives through their DAF
1 The donor decides
The donor identifies the charity and the amount.
2 The donors instructs the fund
They log into their DAF sponsor's platform, or call their account manager, and select the charity.
3 The provider checks
The DAF provider verifies that the donation is eligible: the charitable status of the recipient, the reputation of the organisation, and that the donor will receive no tangible benefit from the gift.
4 The funds are released
The DAF provider disburses the money.
5 You receive the gift
The donation arrives, sometimes under the provider's name rather than the donor's.
What to focus on
Donors who give through a fund are choosing between charities on the evidence available to them and to their account manager. Five things carry that decision.
Good gift administration
A visible charity profile and brand
A strong organisational reputation
Positive endorsements from existing and past donors
Excellent relationship management
Don't treat donors who give with a DAF differently to donors who don't.
Positive recommendations and endorsements can influence future donors and future DAF providers.
How fundraisers can work with donors who have DAFs
Make it easy to give
Add donation buttons to your donation page so donors can click through to their DAF provider's website.
Steward DAF donors
Make sure they receive the same updates and communications as everyone else, and consider engagement events for DAF providers and the donors who use them.
Ask for donor identity information
Ask donors who intend to give through their DAF to tell you in advance. If a gift arrives unexpectedly, contact the DAF provider as soon as you can to request donor details.
Train your income processing team
DAF donations can appear in transaction records under the provider's name. Those gifts need flagging to fundraisers quickly so they can be reconciled to a known donor.
The advantages and the challenges
Advantages
Donors with DAFs tend to be more philanthropically minded and intend to make charitable donations.
Potential for larger gifts, because the donor has already taken the tax benefit.
Access to DAF account managers to answer queries when donors are unavailable.
Once a donor has instructed a donation, the transfer of funds is prompt.
Challenges
Some donors prefer to be anonymous, which makes it harder to develop a relationship.
Some donations arrive with limited data, so you may have to follow up with the provider to complete due diligence.
Gift Aid cannot be applied to donations made with a DAF.
DAF funds can't be used where the donor receives a tangible benefit, such as an auction prize or event tickets.
DAF account manager or wealth manager?
The two roles are often confused, and the difference changes who you should be talking to.
DAF account managers
Process contributions into the fund.
Execute donations to charities.
Handle fund administration such as statements and tax receipts for contributions.
May offer some guidance on investment options within the DAF provider.
Don't typically give broader financial or estate planning advice. Their job is to keep the DAF running smoothly and compliantly.
Wealth managers
Manage investments across all accounts, including retirement and brokerage.
Provide tax planning strategy, such as when and how much to contribute to a DAF.
Provide expertise in estate planning, insurance, cash flow and other financial goals.
Often recommend opening a DAF as part of a larger wealth strategy.
May coordinate with the DAF sponsor or account manager, but don't administer the fund.
Note: some larger wealth management firms have their own affiliated charitable giving divisions, for example UBS Optimus Foundation.
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Anyone – an individual, couple, family or organisation.
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No, DAF funds will have any taxable charitable benefits added to them by their DAF provider. If the funds in a DAF are eligible for Gift Aid, the Gift Aid will be claimed and retained by the DAF provider.
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Not necessarily. One of the benefits of giving with a DAF is that the donor can chose and stay anonymous, if they so wish.
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DAF providers are responsible for undertaking full due diligence on the funds received into a DAFs. The donor may wish to stay anonymous to a charity but when asked the DAF provider can provide further details about the donor to meet a charity’s Know Your Donor checks.
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You should engage with a donor who gives with a DAF in the same way as you would with any supporter. Some donors will want a personal one-to-one connection with the charity and will welcome direct contact from fundraisers and the charities they support. Other donors will want all communications to be sent to their DAF account manager first and then passed on to them when deemed relevant.
Ask your donor about their contact preferences and how they would like to be updated about the impact of their gift and acknowledged for their support. If you cannot ask a donor directly, speak to their DAF Account Manager.
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There are no minimum amounts needed to open a DAF (but some do request an entry level contribution). Most accounts are indefinite and funds do not need to be spent out within a specific timescale.
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Charities Aid Foundation (CAF), Prism the Gift Fund, Stewardship, UBS Optimus Foundation, Community Foundations. There are also private DAFs, which are not open to the public.
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There is no public list of all DAF providers in the UK. Some DAF providers are private entities and not open to the public.
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Ask your donor if they are considering donating with a DAF. This can be woven into conversation when discussing Gift Aid as funds from DAFs are not eligible for Gift Aid and you will need to make sure your charity does not seek to claim on any donations from a DAF.
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To give to charity without setting up your own trust or foundation, which can be a complicated and lengthy process. The DAF provider manages all the administration, compliance and reporting on behalf of the donor.
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They manage the donor’s DAF on behalf of the individual, couple, family or organisation. Each DAF has an account manager, and they complete due diligence on recipients of funds from the DAF, handle the administration related to the donor’s philanthropic giving. They can be the charity contact for the donor, if the donor wants minimal contact with the charities they support. Some account managers may provide insight and advice on charitable causes, but they don’t offer the extent and scale of a philanthropic wealth advisor.
Questions fundraisers ask
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