Community foundations offer a number of different types of funds to clients. By far the most popular option is the Donor Advised Fund, or DAF, which was pioneered by community foundations.

Donor advised fund

A DAF with a community foundation provides many of the same benefits to a client as a private family charitable trust including all tax reliefs, but if they choose, clients are also able to use the community foundation's grant-making, due diligence, monitoring and reporting services. A community foundation spreads the overheads that every charity and private trust incurs over many donor clients. In addition local needs and opportunities are researched and understood and all clients benefit from the local knowledge that is built up over time. In general, community foundation funds are excellent tools for giving back to your local community, and for meeting and networking with other donors.

Advice

The table below summarises the key differences between having a trust or establishing a DAF. The main differences between the two fund vehicles are cost and administration. Tim Thornton-Jones, Partner with Lawrence Graham with over 30 years experience with private clients, offers the following advice:

'As a general rule of thumb, I advise my clients that a charitable trust needs to be endowed with at least £750,000 in order to generate sufficent income to be viable. Even when a client knows precisely what they wish to do, the preparation to the Charity Commissioners for registration can, typically, cost £10,000. An annual audit is likely to cost £5,000 and just the day to day administration can add another £5,000 per annum.'

In a few cases however, clients may consider having both a private trust and a fund at community foundation to accomplish their philanthropic goals (for example, an client may wish to give internationally with their own private trust, but also to give to their community through a community foundation). In this instance a community foundation DAF can be viewed as an "and" rather than an "or" when it comes to deciding the best route to take.

More family foundations transferring assets to donor-advised funds

Frustrated by the upkeep, time commitment and expense of running family foundations, some philanthropists are choosing to close their private foundations and transfer the assets into donor-advised funds. Read more ...

Investment

Financial investment may be a large deciding factor for you and your client. Clients are welcome to discuss the potential for their assets to remain under the management of their choosing but this is only applicable for larger funds. With any gift to a community foundation, the assets are irrevocable and the foundation has the right to bring the funds back under its management at any time if the investments are no longer in line with the policy set by the foundation and are not in the best interest of the donor. This decision would be made with great care and in communication with the donor and the financial adviser.

Read more on fees ...

Community foundations handle all aspects of administration and provide in-depth local knowledge, site visits, monitoring and reporting.

For more information about how CFN and its members can partner with you to serve your clients, please contact Clare Brooks, Director of Philanthropy or phone +44 20 7713 9326.