Donor-advised funds: funding vehicle for family offices

The importance of Philanthropy for family offices

Philanthropy plays an important role for most ultra-high-net worth families around the world. It is often part of the foundation of a family’s legacy and a manifestation of the family’s values and goals. A 2021 Camden Wealth Report reports that 67% of European, 76% of American and 86% of Asia-Pacific family offices are involved in philanthropic giving. Most often, families give to causes that alleviate poverty, help underprivileged groups, fight climate change, improve healthcare or promote education. Family offices face many challenges in their philanthropic endeavours, requiring financial and tax expertise as well as knowledge of the specific charitable sector. To meet these challenges, family offices can turn to donor-advised funds, which we look at in more detail.

What are donor-advised funds?

DAFs (donor-advised funds) are charitable investment accounts used to make donations to charitable organizations. The specific DAF is administered by a public charity to manage the family office’s particular philanthropic activities. To participate in a DAF, family offices must open an account with the specific fund and contribute various assets such as cash, securities, stocks, cryptocurrency or other financial instruments. This form of philanthropic vehicle is most common in the US and has certain advantages for a family office. Firstly, there are huge tax benefits, and secondly, the family office retains control over its donations. Donor-advised funds give family offices greater flexibility in their philanthropic activities. No wonder they are the fastest growing vehicle for charitable giving in the US. Many famous and ultra-wealthy people use DAFs. They include Nvidia CEO Jensen Huang, Amazon founder Jeff Bezos and former Google CEO Larry Page.

Source:  Philanthropy Reports Camden Wealth 

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