Do you want to create a philanthropic legacy for your family?
Many people have discovered there is nothing more satisfying than giving back to the community – usually through donations to charities or through fundraising events or even volunteer work within a not for profit organisation.
Most people see this as being “charitable”.
Being a “philanthropist” is generally perceived as the arena for the ultra-wealthy.
The fact is there are many options for everyday Australians to dip their toes in the water of philanthropy, such as establishing a charitable foundation as part of their ongoing financial strategy or as part of their estate plan.
Here are some facts to help you consider if this strategy is worth your consideration and further discussion with your adviser:
1. You do not have to be wealthy to establish up a charitable foundation
Charitable structures can be established with an $20,000 initial donation and can accommodate a wide range of financial circumstances and philanthropic interests.
2. There are three main types of charitable foundations
The philanthropic option which might be best for you will depend on how much you would like to invest in establishing your foundation, the types of causes you would like to support (e.g. medical research grants or education scholarships) and how involved you would like to be in the foundation’s grant making and investments
The table below provides a good starting point for comparing the options available.
|Type||Minimum initial donation||When established||How it operates|
|Sub-Fund within a Public Ancillary Fund (PuAF)||$20,000||During lifetime||A sub-fund is set up within a wider Public Foundation to distribute 4% or more of its gross value each year to the eligible charities.|
|Private Ancillary Fund (PAF)||Approx. $500,000||During lifetime||A private stand-alone foundation is established by Deed and must distribute 5% of its gross value each year to eligible charities.|
|Perpetual Charitable Trust||$50,000 and upwards||After passing away||A trust is set up in a will to take effect after passing away, it is administered by Trustees to distribute its income each year to the eligble causes.|
3. A charitable foundation can help you to create a philanthropic legacy for your family
Both PAFs and sub-funds within a PuAF are established during your lifetime and can then commence distributing funds to eligible charities. They continue distributing after you have passed away in line with your granting wishes and allow the future generations of your family to remain involved in the grant making.
Being involved in your own charitable foundation during retirement allows you to connect further with the community and remain active when dealing with your preferred charities.
4. A charitable foundation can have tax advantages
A charitable foundation set up during your lifetime attracts the same tax deductions and considerations as making any eligible charitable donation.
While you can make tax deductible donations to your own charitable foundation at any time you are not compelled to make further donations following the initial donation (although to do so means your foundation continues to grow).
A foundation is also a unique environment for income as it is tax free when generated.
5. You can choose which eligible charities receive the money from your foundation
One of the key benefits of establishing a foundation is the ability to name it and create a focus for the foundation’s giving program that achieves your philanthropic goals.
You can either nominate a cause that will remain constant for the life of your charitable foundation (for example, a particular charity, area of research or education scholarship in your name), or you can take a more flexible approach and decide each year where you would like the income from your foundation to be directed.
The only criterion is that the cause or the recipients of grants are endorsed by the Australian Taxation Office as eligible to receive the funds.
6. You can ensure your charitable foundation continues to support the kinds of causes you want it to after you die
The charitable foundation’s deed allows your grant making to continue after you pass away.
Of course, it is possible that your specific charity or cause may cease to exist in the future. In that case, the trustee of your foundation has a responsibility to identify an alternative approach that best meets your original intention via an application to the court or the Attorney-General.
by Anna Hacker, BA (Hons), Accredited Specialist – Wills & Estates, National Manager – Estate Planning AUT Legal Services (part of the Australian Unity Group)
Disclaimer: This article is not legal advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every care has been taken in the preparation of this information, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Australian Unity Personal Financial Services Ltd is a registered tax (financial) adviser. Any views expressed are those of the author and do not represent the views of Australian Unity Personal Financial Services Ltd. If you intend to rely on any tax advice in this document you should seek advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in January 2017. © Copyright 2017