Many people consider leaving a legacy to charity – in fact a recent poll has found that up to 20% of charitable donors have included a charitable bequest in their will[1]. Leaving a legacy to charity can be an important way for donors to continue their giving after their death as well as potentially providing some tax benefits to their beneficiaries.
However in certain circumstances, for example if the donor hasn’t yet decided exactly which charities to support or if the bequest is likely to be a large and complex one, then using a Donor Advised Fund can help and can minimise potentially expensive legal fees.
What is a Donor Advised Fund (DAF)?
A DAF is a fund held by a registered charity such as The Charity Service which allows major donors to make their donation, receive tax relief and then recommend grants over a period of time (typically several years). DAFs are a growing vehicle for charitable support in the UK[2] due to the low administrative burden, immediate tax relief and flexibility they offer. They are typically used to facilitate lifetime giving but can also be a useful tool when considering leaving a legacy to charity.
How can a DAF help when leaving a legacy to charity?
When opening a DAF donors have the opportunity to name a successor who can provide recommendations on how the DAF funds should be granted should the donor pass away. This is a popular option for donors who would like to see their charitable giving pass on to the next generation. Alternatively donors can provide their own wishes for how the fund should be managed in the event of their death. Both the named successor and the donor’s wishes can be changed quickly and easily at any time without any legal fees which allows for flexible estate planning.
If a donor passes away the DAF provider continues to administer the DAF, conducting due diligence and facilitating grants in line with the donor’s succession plans. This relieves the administrative burden from executors and means that they can avoid direct contact from the recipient charities if they so choose.
Can the executors of an estate open a DAF?
Occasionally a person may pass away having specified in their will that a sum of money or a portion of their estate be donated for charitable purposes but without specifying a specific charity. On other occasions beneficiaries may decide to use a deed of variation to give money to charities which would need to be completed within 2 years of the death to qualify for charity exemptions under inheritance tax.
In these circumstances like these executors may then choose to open a DAF which would allow them to receive the immediate tax benefits of a charitable donation but also give them time to consider which charities they would like to support. Executors may also choose to take philanthropic advice at this stage, a service also offered by The Charity Service.
[1] Remember a Charity [2] The 2023 DAF Report, NPT UK.
For more information about DAFs visit For Donors – The Charity Service or for an initial discussion contact Rachel Tomlins, Head of Philanthropy at [email protected].
Everyone’s circumstances are different. We would always recommend speaking to a solicitor when writing your will.
