The days of philanthropists giving directly to a charity or setting up a private foundation are morphing into more accessible giving alternatives. In particular, Donor Advised Funds (DAFs) have been surging in popularity in Canada over the last few years, and rightly so. TDG Senior Consultant Katherine Alyea explains how they’re a simple and exciting way for donors to match their philanthropic aspirations to hundreds of projects.
DAFs are a type of charitable giving vehicle that is established through a one-time gift or ongoing donations that allow an individual or a family to advise on their giving wishes to a cause rather than an individual registered charity. They can be held within a foundation or in a financial institution and can be paid out in income from invested capital or they can provide grants with both capital and income.
Is a DAF Different From a Charitable Foundation?
DAFs offer an alternative option for donor gift planning aligning with the donor’s philanthropic goals, and offer flexibility, simplicity and cost-effectiveness in the management and administration of their gift. Some organizations allow donors to set up a DAF with a $5,000 gift. Donors direct how the funds are to be disbursed while the charitable organization, perhaps a community foundation or a financial institution that’s holding the fund, manages the governance and administration matters. In Estate Planning the beneficiary can be changed after the will is written or irrevocable life insurance is implemented. The donor (or their family) may continue to choose how to direct their funding after creating the Fund.
DAFs benefit from the expertise of the charitable organization’s seasoned experts (financial, legal, governance, philanthropy) without the headache of oversight required for a family foundation. A community foundation can offer additional opportunities for DAFs from robust granting systems and decision-making guidelines to the opportunity to be part of a greater endowment investment portfolio. This approach allows smaller funds/organizations the opportunity to take advantage of the established infrastructure while achieving philanthropic impact. The question of whether to work with foundations vs. financial institutions comes down to the donor’s personal preference.
Examples of DAFs in Canada:
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- Aqueduct
- MakeWay Foundation (Formerly Tides Canada)
- Community Foundations
- Financial/Investment Institutions
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Contact your financial advisor to find the appropriate DAF for your needs.
Promoting DAFs as a Giving Opportunity:
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- Educate constituents of this potential giving opportunity that can benefit a variety of qualified donees and/or programs/services, administered on their behalf
- Identify the donor’s goals – long-term, immediate, etc.- to find out if it is the right giving vehicle for them
- Demonstrate the impact of DAFs on programs/initiatives in your community
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Learn More About Giving Options
TDG suggests exploring all options available to find the right fit for your organization and donors. Every community or city is different. For more information on DAFs, get in touch with The Dennis Group Inc.
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