Giving and leaving a legacy

28 Nov 2019

Philanthropy has often been seen as something only the rich do. In fact, in recent years over 200 billionaire philanthropists, such as Australian mining businessman, Andrew Forrest, have signed ‘The Giving Pledge’1, a commitment to give more than half of their wealth away. But, it’s not just billionaires who are donating a portion of their wealth in order to leave a legacy.

“We hope to help empower individuals and families currently suffering the despair of poverty, slavery and the lack of opportunity for themselves and their children. We feel that if we all do whatever we can with whatever we have, large or small, then each of us will help make our world a more equitable and positive environment for others to thrive in.”

Andrew and Nicola Forrest

The impact of making donations

Giving to others less fortunate or to causes you care about, for example to assist with medical research, can be very enriching emotionally for the givers as well as providing benefits to the receivers. For example, Philanthropy can also be incorporated into your wealth strategy to offer a way of managing tax liabilities such as income and capital gains tax while giving to others.

Private and public ancillary funds

If you wish to witness the results of your giving during your life time, that will continue after you have gone, you could consider establishing a private ancillary fund (PAF) or contributing to a public ancillary fund (PuAF).

PAFs are private charitable trusts that can be established by individuals, families or corporations to create a long-term personalised giving program. They require a corporate trustee, a formal investment plan and generally must distribute at least 5% per annum to charitable causes. You might like to consider a PAF if you have around $500,000 for charitable purposes and want to be included in the ongoing decision-making as to how your money is distributed or want to involve family members in your passion for philanthropy.

A PuAF is a public charitable fund in which you can establish your own account. You can nominate the charity that you would like to benefit from your donation and while the trustee will consider your nomination, the trustee makes the final decision about the distribution of funds. A PuAF would be appropriate if you have around $20,000 or more to donate.

Bequests and testamentary charitable trusts

Other popular ways you can give to charitable causes include leaving a bequest, or gift, to a charity or cause in your Will or by establishing a testamentary charitable trust as part of your Will.

When you die your estate either makes a direct bequest to your nominated charitable causes or a charitable trust is set up with the trustees distributing income generated each year to your nominated causes. A testamentary charitable trust is a way to provide an ongoing legacy to the causes that have been dearest to you during your life and which will carry on forever.

An advantage of establishing a bequest or charitable trust is that because gifts from deceased estates are not tax-deductible, you can donate to potential beneficiaries beyond DGR’s, such as education funding, medical or scientific research, the advancement of religion or the relief of poverty.

At Shadforth Financial Group, we can help you set up a philanthropic structure or charitable giving program as part of your overall financial plan.

1 https://givingpledge.org/about.aspx

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