For families looking to create a philanthropic project but without the high administrative costs of a private foundation for example, a donor advised fund (DAF) can be a great option. A DAF is an endowment fund (or vehicle for giving) that is opened with an independent public charity. It’s like having your own charitable private foundation without all the “hassle,” according to BenefAction, a public foundation that sets up and oversees DAF programs either directly for clients or in partnership with a wealth management company like Richardson Wealth.
Many client families are interested in the DAF option because the framework is already in place, says Sylvia Azoulay, Vice President, Tax and Estate Planning at Richardson Wealth. BenefAction is regulated and registered with the Charities Directorate of the Canada Revenue Agency (CRA). The BenefAction team will set up a fund within your chosen charity; your family names it and adds as much capital as you like during your lifetime. Each contribution earns a charitable tax credit. The DAF is invested and the income distributed – a minimum of 5% of the fund needs to be distributed every year to various charities of your choice.
“It becomes a ‘mini foundation’ of your family,” Ms. Azoulay explains. “You can hold meetings, decide which charities to support, gift the income you’ve earned from the fund and also give away some of the fund’s capital depending on how long you want the fund to last. It’s a great family project.”
For more information on donor advised funds, please contact your Richardson Wealth Investment Advisor and ask for a copy of our education article on the topic.