How we helped a family structure its charitable giving and involve the next generation

Background

Our clients are a married couple who support a wide range of charities across the arts, conservation and education. Several years ago, they decided that it was time to professionalise their giving. They came to us for advice on setting up a permanent charitable vehicle. The couple have children and grandchildren and are keen to engage the next generations in their philanthropic activities. The family has a significant shareholding in a listed company, which now has substantial embedded capital gains.

Key need

Our clients’ first requirement was to identify the right structure for their charitable vehicle and to fund it in the most efficient way. The couple wanted to retain control over the timing and size of donations, while being able to outsource day-to-day investment management. Given that the couple wanted to involve the next generation, the governance of their charitable assets was an important consideration. Lastly, our client wanted the assets to be managed in a way that reflected their philanthropic values. They envisaged distributing a relatively small proportion of their charitable assets each year; it was therefore important to them that the remaining assets could in some way further their long-term charitable objectives.

Solution

We have a lot of experience working with families in this situation. In this case, we advised the couple to set up a Donor Advised Fund (DAF). The fund allows the family to decide how and when to make donations while we invest the assets held within the fund on a long-term, sustainable basis. We advised the family to fund the vehicle with the shareholding in the listed company, allowing them to take advantage of valuable tax benefits.

The family has specified that at least 30% of the investments should demonstrate positive impact in areas of social and environmental need, as identified in the UN’s Sustainable Development Goals. We provide regular reporting on the impact of investments within the DAF. The remaining assets are invested in a range of funds that meet both the clients' and our sustainability criteria.

Using our experience of working with sophisticated philanthropists, we advised the couple on setting up an impactful charitable giving committee, led by their daughter. We also helped draft a flexible succession plan for the DAF, which is structured to run into perpetuity. The plan envisages the children and, eventually, the grandchildren, taking over stewardship of the fund. 

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This strategy was based on our understanding of prevailing tax legislation at the time and should be reviewed on a regular basis in light of changes in legislation and personal circumstances. You should obtain professional advice on taxation where appropriate before proceeding with any investment.