When you think about philanthropy, it might be something like the Bill and Melinda Gates Foundation that comes to mind. But philanthropy isn’t just for retired billionaires who made vast fortunes from selling computer software. In fact, anyone can set up their own perpetual charitable fund with as little as $50,000 and enjoy the satisfaction that comes from making a real difference.

Philanthropy financial planning

As the Manager of Elston Philanthropic Services it’s my job to help people connect with causes that are close their heart. And it’s a job that I love. For me, it’s wonderful seeing someone find a way to not only give, but also get so much in return.

In many ways, philanthropy financial planning is a natural part of your life now. No doubt, you are already involved in charitable work. You could be giving your time, skills and money to support causes in your community. You might be sitting on the board of a Not-For-Profit, volunteering at the local surf club or participating in a fundraising event. You may even be thinking about how you can leave a lasting gift through your Will.

If you’re doing some of these things today, you might be interested in some other philanthropic paths you can take in the future.
As recently as 2001, the Australian government established a Private Ancillary Fund (PAF). The PAF is a type of ‘giving structure’ that allows taxpayers to donate (pre-tax) money, invest the money for perpetuity and grant the income over time to the charities they are passionate about. This structure can last a lifetime, or three, effectively creating a multi-generational legacy of giving.

There are currently 1,800 Private Ancillary funds operating in Australia and almost 2,000 charitable sub-funds. The number of these giving structures is expanding rapidly. Four of the main reasons for their growing popularity are outlined below.

• You can create a perpetual legacy. The beauty of a giving structure is your ability to invest your donations and any future donations in a tax-free environment and grow the funds over time. This allows you to give money for longer but may also magnify your donations as your capital grows, so you can give more money than your original donation.
• You can support your family’s wealth succession plan. We often hear concerns around the lack of preparedness of the next generation to responsibly manage money or the sense of entitlement that may be growing. A foundation is a formal way of saying to your family “we value giving back and making a difference in the lives of others”. It allows you to create a positive, supportive environment to seek feedback from the younger generations on what they care about, shifting the focus to others in need. It also allows children to practice their investment and governance skills by sitting on the board of the family foundation.
• You can claim your tax deduction before you donate. Many of our clients incur a large tax event in a particular year (such as a business or property sale) and are often ready and able to donate a larger amount of money. However, they can struggle to find the charities that want to donate to and are left in a difficult position. A giving structure allows them to make the donation and claim the deduction now and then have more time over the coming years to choose which charities or projects they want to support.
• The fund assets are not part of your estate. Many people prefer to give through their will. However, sometimes there is a risk that the charitable donation may not happen, if the estate is litigated. One way that you can be sure that your charitable intentions will happen is to establish a giving structure while you are alive. This not only gives you the benefit of tax deductions (mentioned above) but ensures that your money will go to the worthy causes and charities that you care about.

 

Do real people really do this?

Yes, they do and they’re not Rockefellers. They’re just people like you who wanted to give and had no idea how much of a difference it was going to make in their own lives. Read their stories below.

Retired financial adviser, John Grenshaw. In his recent interview with Philanthropy Australia, John tells us how the sale of his business was a perfect opportunity to set up a PAF and manage his tax. But ultimately for him, the foundation has just been so much fun, allowing him to connect with likeminded people and create a legacy that will continue on well beyond his life.
www.philanthropy.org.au/stories-john-grenshaw

Belinda Seaton, set up her family foundation several years ago, with the intention of teaching her daughter about the importance of giving back. Belinda speaks to Elston about her personal journey in establishing her foundation, and the enjoyment she and her daughter have found along the way.
www.elston.com.au/philanthropy-is-personal/

 

Would you like to know more?

If you want more details about giving structures and how they work, please click through to Effective Ways to Donate to Charity on the Elston website. If this article has sparked something in you and you’re interested in learning more about Philanthropy financial planning, don’t hesitate to get in touch.

Amanda Sartor
Manager of Elston Philanthropic Services
amanda.sartor@elston.com.au

 

About Amanda.
This article was written by Amanda Sartor, Manager of Elston Philanthropic Services. Amanda specialises in supporting successful individuals, families and business give back and get more. Amanda is passionate about giving back and is actively involved in several giving initiatives including Women & Change giving circle, 10×10 Philanthropy and works as an Associate Consultant to the peak body, Philanthropy Australia. Amanda is a Certified Financial Planner (CFP), holds a Graduate Certificate in Business (Philanthropy & NFP studies) at QUT and is completing her Masters in Philanthropy & Social Investment at Swinburne.