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What is a Charitable Endowment Donor Advised Fund?

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Many donors are familiar with the concept of a charitable endowment but might be less familiar with how to establish this type of gift using a Donor Advised Fund (DAF) and what advantages this structure provides.

To begin, let’s review the concept of an endowment. Endowment Funds, also referred to as Perpetual Funds, are designed to ensure that the gifted capital remains intact and the income generated by the capital is used for a purpose agreed upon by the donor. Endowments are often a lifeline for charitable organizations and institutions such as universities, hospitals and non-profit organizations as they can be used to construct or purchase an asset such as a building or equipment, support research, employ qualified staff or support the long-term tenure of uniquely skilled individuals.

Donors with the philanthropic capacity to make an endowed gift often have particular ongoing programs or projects within a charitable organization or foundation that they wish to support. In some cases, the donor may even want to foster a new program targeted at a unique aspect of a charity’s mandate that has special meaning to them. In both instances, donors will have very specific requirements on the use of funds and will require that the capital portion of the gift be left intact to maximize the flow of income over time.

A charitable endowment program utilizing a Gift Funds Canada Donor Advised Fund (DAF) structure offers the donor the advantage of flexibility. This includes recommending where and how the capital is invested. The donor also has the right to redirect the income to other programs or charities at anytime as the DAF still retains control over the capital within the Gift Funds Canada structure.

In addition to this flexibility, the use of a Gift Funds Canada DAF enables the donor to maintain control as any deviation from the agreed upon use of funds can only occur with the express permission of the donor.

In contrast to using a DAF, endowed gifts made directly to a specific charity will be subject to the terms of the gift agreement with that institution or organization. This structure can often limit the donor’s involvement in decision making and donations made directly to a charity are generally invested in a pooled investment fund, over which the donor has no influence or control.

Donors interested in supporting ongoing work within their preferred charity can benefit from the flexibility and control that a Charitable Endowment Donor Advised Fund can offer. These advantages not only provide the donor with options and peace of mind, they enable their preferred charitable organization to plan for the future and make the most of donor generosity.

For further information about Charitable Endowment Donor Advised Funds, please visit giftfunds.com