by Susan Chenoweth
Head of Elston Philanthropic Services

A lot of Australians like to give back. We’re a generous country. Giving our time through volunteer work and donating to charity is simply what we do. It just seems to be part of our life.

But what about more structured forms of philanthropy? Is that something that we naturally gravitate to, or is it seen as something for ‘other people?’

To paraphrase Elton John, ‘philanthropy seems to be the hardest word.’ And that’s not just because it’s an old word (with ancient Greek roots), or that it’s a bit of a tongue twister. It’s because it’s just not always part of those important conversations we should be having as we approach retirement.

So, what can we do to make philanthropy a normal part of chats with our family and our financial adviser? Why is good to talk about? And who should be driving that conversation?

To get the answers to these questions, Elston recently undertook national research with financial advisers and givers. This article provides an overview of the results.

Millions of conversations on the horizon

Have you been reading about the intergenerational transfer of wealth that’s on the horizon? It’s happening on a scale that’s never been seen before. Over the next two decades, it has been estimated that around 3.5 trillion dollars will pass from one generation to the next.¹

This mass movement of assets is unprecedented. It’s also triggering conversations about what that means for families. Is it solely about money being transferred through wills? Or is there an opportunity to anticipate the impact this money can have, and to see what could be done now, rather than later?

Baby boomers are sitting down with their financial advisers and digging into their financial situation, aiming to get a clearer picture of how much they currently have, how much they’ll likely need for the future, and how much might be available to give, either to their family or to a good cause.

Ultimately, their goal is to see whether ‘giving while living’ is viable.

Discussions don’t have to get too deep

Now, at this point, you might be feeling that the conversation is in danger of going too deep. But it doesn’t have to centre on feelings and philosophies. Often, it’s just a continuation of chats about family and what you feel is important.

Your financial adviser most likely knows a lot about you. They’ve guided you as your children have grown up. They have a clear idea what’s important to you. And they know what your plans for the future are, because they’re helping you to work towards them.

So, feel free to ask questions. For example, consider asking, ‘If I want to do more in the community as I start to work less, is that possible? Will I have enough for retirement, and for my loved ones, while still having enough left to support some good causes?’

It’s not unusual to have a vague idea in the back of your mind that’s been planted there by recent events. This might stem from a health scare for someone in the family, or something that’s happened to a friend. Often these experiences get you thinking about giving back in a more structured way.

You don’t have to be Bill Gates

It’s nice if you’re as wealthy as famous philanthropist Bill Gates. But you don’t have to be a Microsoft founder to get involved with structured giving. There’s a couple of ways to get started.

Although many participants in our research believed that at least $500,000 was necessary to get involved with charitable giving, a Public Ancillary Fund (PuAF) can be set up with just $25,000. Or, with a million dollars, you can look to establish a Private Ancillary Fund (PAF).

If your financial adviser or accountant indicates that structured giving could be feasible, the next step is to get some more information on the options, including PAFs and PuAFs. This will allow you to think about what you might, or might not, want to do.

Learn more about PAFs and PuAFs

Get your financial adviser to break it down for you

You may have heard about the potential tax benefits of structured giving but unsure how it actually works. Don’t be afraid to ask questions.

Get your financial adviser to simplify things for you. Technical jargon can sometimes creep into the conversation. Ask them to remove the complexities, as much as they can and bring it back to simple explanations.

Depending on the topics being discussed, you may also be advised to speak with your accountant and legal expert.

The simpler the information is, the easier it will be for you to make an informed decision.

Passion. Legacy. Family.

In our research, we found that 67% of respondents were interested in exploring the different structures and tax benefits associated with philanthropy. However, we also discovered that tax considerations may not be the deciding factor that motivates people to get involved.

More than half of respondents were interested in getting their family involved in the giving process, potentially creating a family legacy.

This shines a light on a number of possible family dynamics. The relationships within families have evolved as life expectancies have increased*. Parents are now living longer and getting to be part of their children’s lives in ways that previous generations often couldn’t.*

Involving the family in philanthropy presents an opportunity to bring the family closer. There’s also an opportunity to give younger generations a chance to take on management responsibilities through something like a charitable trust. Parents or grandparents could see this as a way to prepare the next generation for managing future wealth, or for the day when they take the reins of the family business.

*According to macrotrends.net the average life expectancy from 1974 to 2024 has increased from 72 to 84 years.

Ready to start a conversation?

Elston financial advisers have had a lot of conversations with clients about different ways philanthropy might fit into their lives, and perhaps be integrated into their retirement plans. Being involved in a charitable fund can be a great way to strengthen community connection and family bonds.

If you want to know more, reach out to your Elston financial adviser, and let’s start a conversation about philanthropy.

References:

  1. Productivity Commission, Wealth Transfers and Their Economic Effects, Research Paper, Australian Government, November 2021. https://www.pc.gov.au/research/completed/wealth-transfers/wealth-transfers.pdf

If you’d like to know more about Elston Philanthropic Services, contact Susan here.