Involving the next generation in decision making can foster a tradition of philanthropy, deepen family relationships and help build a lasting legacy, writes Jodi Kennedy, General Manager of Charitable Trusts and Philanthropy at Equity Trustees.
Australia is in the midst of its biggest ever intergenerational wealth transfer, with around $3.5 trillion to be transferred from baby boomers to their heirs in the next 20 years.
As a result of this transfer, we are seeing an increasing number of families holding conversations around intergenerational philanthropy, with older family members keen to pass on social values and a tradition of giving to their children and grandchildren while they are still able to influence them.
Integrating philanthropy into family life can be an excellent way to establish your family values, create a shared interest and build something of value together. However, perspectives can vary through the generations, so it is important to decide together how to structure your giving, what social problems to focus on and then which organisations to support, to ensure everyone is on the same page.
Making family decisions
When assisting families in making decisions about their future giving, Equity Trustees recommends families first identify the values that are important to them, before looking for the social causes they might want to support and determining the type of giving structure to use.
Each family has their own heritage of values, goals and experiences which are constantly evolving, so when giving as a family, agreeing on and documenting these can help to establish a clear way forward. Planning should involve all family members who are of a certain age (younger children can be included in the conversation too) and if you have a larger family, consider appointing someone as chair to keep the conversation moving and ensure all voices are heard.
Some important questions to ask include:
- Which values are important to us as a family? These should be core family values rather than just related to philanthropy. (And determining if these are shared is important!)
- How do we operate as a family, what interests us?
- What are the one to three social causes we would like to support as a family and why?
Getting to know the structures available
Once your family has established what they want to achieve, it is then time to explore the types of giving structures available to help you meet your goals.
If you are planning to give a one-off amount or a relatively small amount each year, it may not be necessary to set up a specialist structure, such as a trust. However, if your family wishes to give on a regular basis, there can be numerous benefits to establishing a charitable trust, including tax concessions and the ability to set up a structure that can generate the income and capital growth needed to support the chosen causes for the long-term. See the breakout box below for descriptions of the main structures and how they work.
Family giving in action
At Equity Trustees we have worked with hundreds of families that have opted to bring their family values to life through intergenerational giving.
Brothers Ted and Bob Springett, for example, decided to establish The Springett Family Foundation in May 2004. The date was chosen to honour the centenary year of the Springett family establishing their business in Bowral in the Southern Highlands of NSW, which included a bakery, general store and soft drinks plant.
It was always Ted’s wish to repay the Bowral community for their ongoing support. Seeded from the $1 million sale of Ted’s holiday home, the foundation was established to support causes based in Bowral and the Wingecarribee Shire.
Since 2004, over $1.3 million has been distributed to the community from the legacy, with a focus on supporting young people, individuals living with a disability and those in aged care. Today Ted’s son, Tony Springett OAM is at the helm of the foundation, continuing the good work his uncle and father began.
Another example is the Harris Estate Charitable Foundation in Queensland, run by Lyndal Brown and her partner Peter, who are passionate advocates for the conservation of natural habitats and native species.
While the foundation was first established by Lyndal’s parents, it is Lyndal who is using the $2 million structured giving vehicle to honour her father’s love of the environment by supporting grassroots conservation organisations including Bush Heritage Australia, F.A.M.E and Australian Wildlife Conservancy. As this perpetual fund continues to grow, it guarantees a legacy of environmental protection through the valuable funding it distributes each and every year.
Building an impactful legacy
There are a range of ways to give as a family and structures to use to do so. Determining the best one can make a difference to those receiving your generosity – as well as your own financial bottom-line. As trust structures can be complex, we recommend seeking advice from a business that specialises in philanthropic giving to help you and your family to build an impactful legacy that is enduring and works for your family’s needs.
Read F&P’s coverage on Equity Trustees Annual Giving Review here.
Finding the family vehicle
The main considerations when structuring giving are how much you intend to give, the timeframe for giving and the level of engagement you want as the philanthropist. Some of the options available include:
Sub-fund under an existing trust
A sub-fund is a simple way to begin structured giving during your life without the administrative burden of maintaining a trust yourself. Unlike other trust structures, you don’t need hundreds of thousands of dollars to start one (potentially, just $20,000). You simply need to engage a trustee business (such as Equity Trustees), set up a uniquely named sub-fund and select which charitable organisations or projects you wish to support each year. The trustee will then do all the investing, governance and administration on your behalf.
Private Ancillary Fund (PAF)
A PAF is a popular vehicle for those who are interested in establishing a standalone charitable foundation with responsibility and oversight of its own operations. PAFs are often used by people who want to keep on giving after their death and they provide a structured way to involve children and family in giving. Gifts to a PAF are tax deductible at the time a gift is made but cannot be revoked. Given they are private in nature, PAFs cannot seek or receive contributions from the public.
Perpetual Charitable Trust (PCT)
A PCT is typically established through your will and comes into effect after death. PCTs offer flexibility in terms of the types of organisations they can provide funding to. Each year grants can be made to charities, individuals in need, or scholarships and awards from the trust’s income. Depending on how your will is drafted, a PCT can provide a number of benefits, not the least of which is enabling your support for a cherished cause or organisation to carry on long after your death.
Managing a trust requires specialist knowledge in areas including trustee duties, investment, taxation, governance and grant-making. Therefore, many Australians choose to work with a trustee or co-trustee who can advise on the best structure and act on their behalf.
Equity Trustees is an independent specialist trustee company offering trustee or fiduciary services to a range of private and corporate clients.
 McCrindle, 2016, Wealth Transfer Report, A Report for No More Practice, September