If you are thinking of making a charitable gift, here are three of the commonly found approaches which you might like to explore. They range from quick and simple, to slower and more complex. Each option achieves different objectives.
For some people, especially when the sums involved are more modest, the quickest and simplest route is to donate directly to a favourite charity or charities. Many charities have the option to do this on their website. To help guard against online fraud, you can verify details about a UK charity on the online register maintained by the charity regulator (Charity Commission for England and Wales, OSCR for Scotland).
For many donors, however, it’s a big decision to select which charity to benefit, especially if the donation sum is larger. Some donors know the cause which is of interest to them, or the particular geographic area they would like to benefit, but not yet the names of the specific charities. Others are interested in more strategic interventions in collaboration with others, or want to build a charitable fund which is put to use over a series of years. When direct donations are not the preferred route, it is often the case that some intermediate structure is used as the mechanism to enable onward grants over future months and years. This leads to the following two options to explore.
Entrepreneurs who have built a successful business in a particular field might reach a point when they want to transfer that energy and put it to use for charitable purposes. Where someone has in mind an active charity which delivers programmes and employs staff, this is where legal advice on a charitable structure is required. This is not a quick and simple donation scenario. This requires time, planning and the recruitment of a board of trustees are just a few examples of things to consider. Once the new organisation’s governing document has been finalised and registered with the appropriate charity regulator, the new charity will then have to observe the usual annual cycle of accounts preparation and the annual return for the charity regulator. There are compliance obligations and trustee duties to keep in mind.
This third scenario has a focus on grant making, if the control which comes with being a charity trustee is not essential, then an efficient and streamlined option might be to consider a donor advised fund (DAF). A DAF is a sub-account of an umbrella grant making charity, which means there is no delay in having to wait to register a new charity, since the grant maker already exists. The role you have with your DAF account is to make suggestions and recommendations of which charities might receive grants (noting that the DAF provider is the final decision maker). You are not a trustee, and do not therefore have the associated duties and responsibilities of a charity trustee. You will build a relationship with your key contact at the DAF provider and liaise with them on proposed grants. For some people, this might be a relief, leaving them with just the role they want – proposing which charities receive a grant. For those who want to retain the final control which comes with being a charity trustee, however, setting up a new charity for grant making might be their preference.
Something these three options have in common is that they might involve a gift of money or a gift of investments. Some major UK charities do now accept gifts of investments, but you would need to check with the individual charity for details of what they do and do not accept. The process is more complex when investments are involved, and not all types of investment might be suitable for gifting. The tax reliefs and exemptions which are relevant for a cash gift are not exactly the same as for a gift of investments. Your tax adviser will keep you right here.
These three options don’t just exist for lifetime gifts. They can also be included in how your Will is written. With the first scenario, it is possible to name specific charities in your Will. With the second and third scenarios, the charity or DAF account can also receive funds from your estate if you so choose. Your solicitor can advise you on how best to approach this.
This article is not legal or tax advice. You should speak to a solicitor or tax adviser to get advice for your own circumstances.
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