Case study: Starting your philanthropy journey with donor-advised funds

Philanthropy is more than just giving back – it’s a powerful way to create a legacy that reflects your values and connects you to causes that matter.

This case study showcases how a family achieved just that. By establishing a donor-advised fund (DAF), they successfully balanced tax efficiency, long-term growth and family engagement to make a meaningful impact on their local community.

The client

• Mark, a 55-year-old entrepreneur with a net worth exceeding £45 million.
• Together with his wife, they are committed to creating a family legacy of philanthropy.
• The couple’s goal is to involve their three children in establishing long-term charitable giving and embed it as a core family value across generations. 

Their ideas

Mark’s goals for his philanthropic efforts were multifaceted:

• Establish a family legacy: Mark aimed to create a philanthropic legacy by making an initial £1 million donation – either in cash or shares – to registered charities aligned with the family’s values. This initial contribution would serve as the starting point for the family’s ongoing philanthropic efforts, envisioned to endure for generations.
• Family engagement: He wanted to involve his wife and children in the decision-making process, ensuring that the charitable efforts reflected their shared values and cultivated a spirit of giving in his children.
• Structured governance model: Mark desired a clear and transparent framework for family involvement in managing the charitable funds and distributing donations over multiple years.
• Maximise tax efficiency: He sought to minimise taxes on his charitable donations while maximising the philanthropy impact for the chosen charities.
• Long-term investment growth: He aimed to grow the funds over time to support ongoing charitable contributions.

Our solution

We introduced Mark to the concept of a DAF, an ideal vehicle for individuals seeking a strategic, flexible and tax-efficient approach to philanthropy. Here’s how it worked:

• Tax relief on contributions: Mark transferred £1 million in shares into the DAF, receiving an immediate charitable income tax deduction for the full amount while avoiding capital gains tax on the gifted shares. He can also make future contributions to the DAF.
• Tax-free growth: As appointed investment manager of the DAF holdings, RBC Private Wealth invested the contributions in a diversified portfolio of equities and fixed income assets, designed to maximise growth without incurring tax liabilities. Investment time horizons were considered to ensure liquidity when needed. Over five years, the DAF’s value grew free of tax to £1.34 million.^*
• Family governance: With our support, Mark established a formal governance structure for the DAF, and made his wife and three children co-advisors. This ensured charitable distributions aligned with their values. The family actively participated in the investment management of the DAF assets, providing a unique opportunity to learn about philanthropy and the rationale behind investment decisions.
• Strategic distributions: Over time, the family distributed £340,000 to various charities, supporting areas like educational scholarships, healthcare initiatives and environmental conservation. The remaining funds continued to grow tax-free in the DAF, allowing for sustained giving and a family legacy. The DAF also allowed Mark and his family to remain anonymous when making grants, reducing unsolicited requests and public attention.

^*Based on six percent per annum after fees. Figure not adjusted for inflation.

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