Donor-advised funds vs charitable trusts: which works best for your giving goals?

When it comes to structured charitable giving, two of the most popular options are Donor-Advised Funds (DAFs) and Charitable Trusts. Both can be highly effective — offering generous tax advantages and a framework for giving strategically — but they work in different ways.

The right choice depends on how involved you want to be, the level of control you’d like, and how you want your philanthropic legacy to look.

What is a donor-advised fund?

A DAF is a straightforward way to give strategically without running your own charity. You contribute to a sponsoring charity, receive your tax relief straight away, and they handle the administration, compliance, and reporting. You can then recommend which causes to support, and when.

Why it works well:

• Enables long-term, strategic giving without the legal and regulatory burden.
• Gives the option to donate anonymously or publicly while enjoying the same tax benefits as your own charity.
• Lets you choose how funds are invested before they’re granted to causes.
• Allows you to time contributions for tax planning while distributing grants later.

What is a charitable trust?

A Charitable Trust is a legal entity in its own right, registered with the Charity Commission and governed by trustees. It must have a defined charitable purpose that benefits the public, but beyond that, you have significant scope to shape its operations and goals.

Why it works well:

• Full control over investment decisions, grant-making, and governance.
• Operates under its own name and mission, giving visibility to your philanthropy.
• Can hold and manage a wide variety of assets, including those that generate income.
• Can involve family members as trustees, creating a multi-generational legacy.
• Certain trust types can even provide income streams to named beneficiaries while still serving charitable purposes.

The tax advantages

Both DAFs and Charitable Trusts provide strong UK tax incentives:

• Gift Aid – allows charities to reclaim basic-rate tax on donations, with higher-rate taxpayers able to claim extra relief.
• Capital Gains Tax relief – gifts of qualifying assets such as listed shares or property can usually be made without triggering CGT.
• Inheritance Tax relief – gifts made during your lifetime or through your will are free from IHT, and leaving 10% or more of your net estate to charity can reduce the rate on the remainder from 40% to 36%.
• Ongoing tax exemptions – both structures are generally exempt from income and gains tax where funds are used for charitable purposes, with possible VAT and Stamp Duty reliefs in some cases.

The difference is in the workload: with a DAF, the provider manages compliance and claims; with a Charitable Trust, those responsibilities rest with the trustees.

Pros and cons of Donor-Advised Funs & Charitable Trusts

Donor-Advised Funds

Pros:

• Quick and easy to set up, often within days.
• All compliance, reporting, and admin managed for you.
• Flexible giving — contribute cash, investments, or other assets.
• Option to give anonymously and involve family members.

Cons:

• Once donated, the assets belong to the sponsoring charity. You can advise but not direct how they’re used.
• May have minimum contributions and admin fees.
• Limited scope for creating a distinct, branded charitable presence.

Charitable Trusts

Pros:

• Complete control over governance, investments, and grants.
• Ability to build a public charitable identity.
• Suitable for holding complex or income-generating assets.
• Opportunity to involve family as trustees and create a long-term legacy.

Cons:

• Slower and more complex to establish.
• Ongoing responsibilities for compliance, reporting, and filings.
• Financial and operational details are public.

Bottom line:

If you value speed, simplicity, and minimal admin, a DAF can get your giving strategy moving almost instantly. If you prefer complete control, public recognition, and the chance to shape a charitable legacy that reflects your vision, a Charitable Trust may be the better fit.

Articles on this website are offered only for general information and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.

Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise and investors may not get back the amounts originally invested.