A time for giving

12 Dec 2013

By Shadforth Financial Group

Traditionally Christmas is seen as a time of giving. In addition to the tradition of gift giving, today, more and more people are suggesting to friends and family that instead of buying gifts they instead donate the amount that would have been spent to charity. But why stop giving at Christmas?

Philanthropy has always been seen as something the rich do. In recent years two of America's richest men, Bill Gates and Warren Buffett, set aside considerable parts of their substantial personal fortunes for charitable giving. But more and more not so fabulously rich people are donating a portion of their wealth to charitable causes in life, or in death, to help those less fortunate or for other benevolent purpose.

The impact of donations

Giving to others less fortunate or to assist with medical research can be very enriching emotionally for the givers as well as providing benefits for tax planning. Philanthropy can be incorporated into an investor's wealth strategy to offer an innovative way of managing tax liabilities such as income and capital gains tax.

Not-for-profit organisations reliant upon donations often encourage less wealthy donors to commit to regular giving and help them do this by setting up direct debits from bank accounts or credit cards.

More wealthy individuals wishing to witness the results of their giving during their life time can establish a Private Ancillary Fund (PAF) as a vehicle to hold assets and provide ongoing distributions to charity. PAF's are private charitable trusts that can be established by individuals, families or corporations. They require a corporate trustee, a formal investment plan and must distribute at least 5% per annum to charitable causes. Donors are entitled to a tax deduction for the full donation, which can be spread over a period of up to five years and investments held within the trust are exempt from income and capital gains tax. The charities receiving distributions must be registered with the Australian Taxation Office (ATO) as Deductible Gift Recipients (DGR).

Another popular way of giving is by way of bequest via a deceased estate or distributions from a testamentary trust established by the donors will upon their passing. The donor is able to set aside part of their estate as a direct bequest to a favoured charity/ies or to be held in a charitable trust with the trustees distributing the income generated each year to charity or benevolent causes. Gifts from deceased estates are not tax deductible and because no tax deduction is being sought this opens the door to potential beneficiaries beyond DGR's. The beneficiaries of charitable trusts don't necessarily need to be registered as DGR's with the ATO.

A charitable trust provides a lasting memorial to the causes that have been dearest to you during your life. Such trusts allow a foundation to be established upon your death that carries on forever. Your charitable trust may benefit a variety of humanitarian or community purposes such as education, medical or scientific research, advancement of religion, or the relief of poverty. You may have one or a number of different causes you wish to provide for after your death.

Shadforth​ Financial Group has a dedicated philanthropic advice group - find out today how you can include philanthropy as part of your financial plan and make a real and lasting difference through this worthwhile activity.

To learn more about Barry, view his online profile.

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