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You make the occasional charitable donation, but now you want to take a more strategic and structured approach to giving. Where do you start?
With the ease in which technology connects people to causes across the globe, there’s no shortage of ways philanthropists can channel their generosity. But with so many options to choose from, it can be challenging to decide where your giving will make the most impact. Add to this, decisions about how your donations will impact your tax and how to manage your money to ensure your cause receives maximum benefit.
A great starting point is to seek advice from your Yellow Brick Road financial adviser. We’ll help you explore and understand your options, as well as demonstrate how to incorporate philanthropy within a financial plan.
Giving is a very personal act so your philanthropic efforts should reflect your own beliefs, motivations and financial resources.
Giving is a very personal act so your philanthropic efforts should reflect your own beliefs, motivations and financial resources. By asking yourself these questions, you can narrow down what type of giving best suits you. For example, if you want hands-on involvement, you might consider establishing a charitable foundation. If you prefer minimal involvement, leaving a bequest in your will or donating through an intermediary may be more your style.
- What is your reason for giving to others?
- What are the causes or people you wish to benefit from your benevolence?
- What is the amount of money you can give?
- How frequently and over what timeframe do you expect to give?
- Do you prefer to give to charities or individuals?
- How involved do you want to be and how much control do you want over your giving?
- Are you seeking a tax deduction for donations?
- Are there constraints to your giving, such as the reliability of your income?
- Do you wish to give beyond your lifetime?
Get it right from the start with professional help.
Seven ways to give
Here are some of the options to consider for planned giving. Each requires varying levels of commitment, time, effort and paperwork. When choosing an option, use your answers from the above questions as a guide.
1. Private Ancillary Funds (PAFs)
Private Ancillary Funds (PAFs) are a type of tax-deductible private charitable foundation (also known as a charitable trust). They require a substantial sum to establish and have ongoing administrative costs. You retain full control of the fund and how the money is spent. Fundraising from the general public is not allowed so your PAF can only receive funds from the personal contributions made by you or a close associate.
2. Public Ancillary Funds (PuAFs)
Public Ancillary Funds (PuAFs) are also a type of charitable foundation, but unlike a PAF, you are not the Trustee and have less control over the gifting. It is managed by members of a committee or board and must receive contributions from the public. A PuAF exists for the purpose of providing grants to deductible gift recipients (DGRs).
3. Donor advised sub-fund
A donor advised sub-fund can exist under the umbrella of a community foundation, either operating in your local community or in a community you wish to benefit. As the donor, you can name the sub-fund and ensure the funds benefit this specific community. Donations exist in perpetuity, and tax deductions are available.
4. Workplace giving
There are workplace-giving and payroll-giving schemes organised by some charities and employers. You can usually choose your preferred charities from a selection and the amount to be deducted. Your employer then pays the donation directly to the charities each payday without it affecting the calculation of your gross income, super guarantee payments or fringe benefits. In most cases, a tax deduction is available provided your employer has checked the charity has ongoing DGR status.
5. Giving after your death
If you prefer your philanthropy to occur after your death, an option is to leave money in your will by way of a testamentary trust. This type of foundation allows you to gift a portion of your estate or specific assets after your death. It can carry on in your name in perpetuity, supporting the causes that are important to you but not tieing up your funds during your lifetime.
6. Impact investing
Impact investing allows you to align your investments with your philanthropic values. There are many ways to do this, from investing in sectors like sustainable agriculture and microfinance to investing in funds with explicit social missions.
Crowdfunding allows you to pick and choose your charity project online. There’s also the instant gratification of seeing where your money goes and what it can accomplish. Keep in mind that most donations to crowdfunding appeals are not tax-deductible unless it was set up by an organisation that has DGR status.