I have had the privilege of volunteering at a local charity in the North East and have seen first-hand the profound benefits of the practical and compassionate support it provides. My reward for simply giving-up some time was a feeling of well-being (and a reality check on my stress levels!). However, the rewards for those considering philanthropy can extend from emotional into financial and practical benefits too.

Frequently those with accumulated wealth have a desire to ‘give something back’ but aren’t particularly comfortable with Inheritance Tax (IHT) as a way of doing so. As part of their estate planning, philanthropic legacies could instead be used to direct funds to preferred charities on death.

Charitable legacies can reduce the value of an estate on which IHT is charged, potentially to nil. Additionally, depending on the amounts involved, where there is still IHT to pay then that might be at a reduced rate of 36%, rather than at 40% as is typically the case.

To give added peace of mind and potentially longer control and remembrance, a “family foundation” could be considered. This is essentially a personalised charity, funded solely, or primarily, through an individual, a family or a family business. The reasons for deciding to establish a family foundation can vary from one person to the next, but triggers can include:

  • A desire to meet a need in society which does not appear to have been identified by others
  • To pass on the importance of altruism and philanthropy to younger generations in the family
  • To provide a tool to teach younger generations how to deal with money responsibly (recognising they may be likely to inherit significant private wealth)
  • To intentionally limit the inheritance that younger generations will receive.

The establishment of a family foundation could form part of a family’s long-term wealth management plan. The structure could provide as much or as little control as the founder desires (subject to complying with the relevant law), along with flexible arrangements to perhaps involve younger members of the family in a consultative role.

For many successful individuals, a desire to make a social impact with their wealth and expertise is a highly important way of giving back. To do so effectively and efficiently in today’s landscape of regulation, complex tax reliefs and media scrutiny, it is vital to receive high quality, knowledgeable advice from practitioners who specialise not only in managing wealth but also in the intricacies of charitable giving. Choosing advisers capable of meeting all those needs and helping you with the stewardship of your family wealth is key for those who wish to have crafted structures and beneficial outcomes from their giving.

Our team of financial advisors within Womble Bond Dickinson Wealth can assist with a discussion on family foundation planning. Thanks to our unique links to the legal and tax expertise within Womble Bond Dickinson, we can then also coordinate an integrated team to design, implement and then help manage a suitable family foundation over the long term. In short, we can provide a package of philanthropy-related services, with legal, tax and financial planning experts all working in tandem under the same roof.

So perhaps charitable giving is already part of your financial planning but you want to look at ways of being more strategic. Maybe you are interested in doing more in this area but don't know where to start. Or maybe you are formally involved with a charity as a trustee and are unsure about whether more integration between your advisers could yield better results for your cause. In such situations, do get in touch to discuss how we can help.

This article, written by Womble Bond Dickinson Wealth Limited which is regulated by the Financial Conduct Authority, is provided for general information only and reflects the relevant rules at the time of publication in February 2024. This article does not constitute any professional advice and so should not be relied on for any purposes. You should consult a suitably qualified professional adviser for further assistance. Please note that past investment performance is not a guide to future performance. The value of an investment and any income from it may go down as well as up over time and investors may not get back the amount originally invested. Care should be taken to ensure that any financial plan and its underlying components are regularly reviewed to take account of any changes such as personal situation, objectives, tax rates and the variabilities of investment performance and associated charges over time.

This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.