When the giving is easy
By | smh.com.au | 27 June
Contrary to popular belief you don't have to be dead or rich to make a difference financially. Most people make bequests to their favourite charity or cause as part of their will but it is possible to make a lasting gift while you are still around to see it.
Private charitable trusts or Prescribed Private Funds (PPFs), and contributing to an established gift fund are two ways individuals can deliver reliable and sustainable financial support to a chosen charitable or community organisation.
Of course there is nothing wrong with making a direct gift.
In all cases, as long as the gift is for $2 or more and the recipient is a deductible gift recipient (DGR) registered with the Australian Tax Office and the gift is made freely and without conditions, then the donation will be tax deductible.
Prescribed private funds
David Knowles, head of Philanthropic Services at Perpetual, says a PPF is a private charitable trust, usually established by an individual or a family.
According to the Australian Centre for Philanthropy and Non-profit Studies at the Queensland Institute of Technology, the sole purpose of a PPF is to provide money, property or benefits to funds, authorities or institutions which are DGRs.
A PPF usually takes the form of a company limited by guarantee as a trustee of a charitable trust fund.
"A PPF is flexible. You can have as much or as little involvement in it as you like," he says. "You can become a trustee of the fund and be involved in its decisions, or you can establish an advisory committee to assist the trustee in those decisions. You can also be involved in its activities, such as the presentation of awards, prizes or scholarships or the support of community initiatives. You can also help set investment policy."
A PPF must have at least one trustee who meets the Tax Office's definition of a "responsible person" - a professional person with a degree of responsibility to the community. Perpetual and other trustee organisations such as ANZ Trustees, State Trustees and Equity Trustees often act as trustee or co-trustee for people setting up PPFs.
One advantage of a PPF is that donors are entitled to a tax deduction for the full donation. The deduction can be spread over five years, which can be attractive to major donors with high assessable incomes. Funds held in a PPF are income tax and capital gains tax-free which allows for significant capital growth and income production in the long term.
Knowles says a PPF is a good option for people wishing to create a strong sense of family involvement. "As this is a private trust, it is personal to the founder and their family and can become a focal point for bonding families, particularly across generations," hesays.
A PPF can also be considered portable. In other words, administration is not tied to one organisation.
Perpetual and Equity Trustees both require a minimum $500,000 to establish and manage a PPF.
Foundation gift funds
A much cheaper way to create a lasting legacy is to open your own gift fund account within one of the existing trustee organisations.
In these cases the minimum requirements are generally about $20,000.
People less inclined to establish a charitable trust on their own get access to the structure and benefits of the Perpetual Foundation.
It may also appeal to people who wish to establish a charitable fund without taking on legal duties and the burden of administration. Donations are invested into a pooled fund specially designed for non-profit organisations - in the case of the Perpetual Gift Fund, the Perpetual Charitable and Community Investor Fund (CCIF) - to provide long-term capital growth and regular income.
A potential disadvantage of a gift fund is that its administration is tied to one organisation, which may not appeal to those looking to establish a charitable trust "on their own terms".
How to set your intentions in stone
After witnessing a family row over the execution of her father's will, Janice Durkin wanted to ensure a smoother distribution of her own inheritance.
An only child with no children, Durkin knew she wanted to help others but struggled with the best way to make sure her wishes were carried out after she died.
It was while writing a new will with ANZ Trustees that the former business librarian-turned-writer learnt that she could watch her money go to a range of worthwhile causes that she and her now deceased parents supported.
"They explained their charitable-trust structure and I thought, 'This is something that will work for me.' I didn't know they existed on a small level," she says.
Durkin decided to establish the Janice Durkin Family Gift trust with the minimum $50,000 on the basis that from small things, big things grow.
"I like it because it is set in stone, it is legal and no one can fiddle with it. I've chosen to have a level of control but I could have handed it over and still got the tax deduction - which is a good thing, too."
She is hoping that the capital will build up over time enabling her to increase the size of her grants to chosen causes.
"I made my first baby grant of about $1000 to a mums and babies course, which was one of the things my mum was keen on. In the future I'd like to put something in the way of new writers."
Stephanie Chenoweth, managing director of ANZ Trustees, says that increasingly older Australians are moving away from annual, once-off "cheque book charity" to granting programs or philanthropy.
"They do not have to be dead or rich to establish a foundation," she says. "Doing so in a will is one option. If people establish a foundation during their lifetime they not only get the pleasure of being involved and seeing the results, but also to be able to contribute a lasting positive social change."
First published by Smh.com.au on June 27 2008
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